<PAGE> 1
Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from to
---------------- ----------------
Commission file no.: 33-00086
DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP (exact name of
registrant as specified in its charter)
Wisconsin 39-1518732
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
Brookfield Lakes Corporate Center
250 Patrick Blvd., Suite 140
Brookfield, Wisconsin 53045-5864
- ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 414-792-9200
Securities registered pursuant to Section 12(b) if the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 .
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the Limited Partnership Interests ("Interests")
is indeterminable because there is no established market for the Interests.
The number of Interests outstanding of the registrant as of February 28, 1996:
17,466.31.
<PAGE> 2
Annual Report on Form 10-K
Index
YEAR ENDED DECEMBER 31, 1995
Dece Companies Income Properties - A Limited Partnership
Brookfield, Wisconsin
<TABLE>
<CAPTION>
PART I Item Page
<S> <C> <C>
Description of Business 1 3
Description of Properties 2 5
Legal Proceedings 3 8
Submission of Matters to a Vote of Security Holders 4 9
PART II
Market for Registrant's Limited Partnership
Interests and Related Partner Matters 5 9
Selected Financial Data 6 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 11
Financial Statements and Supplementary Data 8 22
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 9 22
PART III
Directors and Executive Officers of the Registrant 10 22
Executive Compensation 11 24
Security Ownership of Certain Beneficial Owners and
Management 12 25
Certain Relationships and Related Transactions 13 25
PART IV
Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 14 26
Signatures 28
Financial Statements 29
</TABLE>
<PAGE> 3
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 3
PART I
Item 1. Description of Business
Decade Companies Income Properties - A Limited Partnership (the "Partnership")
is a limited partnership formed in 1985 under the Uniform Limited Partnership
Act of the State of Wisconsin to invest in existing residential real properties
and to make equity-participating and other loans on income-producing real
properties that are secured by first or junior mortgage liens.
The Partnership is engaged solely in the business of owning and operating
residential apartments. During 1995, the Partnership owned and operated three
apartment complexes consisting of 935 rental apartment units.
The Apartment complexes owned by the Partnership are collectively referred to
as "the Apartments" throughout this report. In December 1986 the Partnership
acquired Laguna Vista Apartments, a 235-unit apartment complex located in
Largo, Florida. In January 1989 the Partnership acquired The Meadows II
Apartments, a 316-unit apartment complex located in Madison, Wisconsin. In
January 1990 the Partnership acquired Ashley Pointe Apartments, a 200-unit
apartment complex located in Orlando, Florida. In February 1990 the
Partnership traded Laguna Vista Apartments for Town Place Apartments, a
240-unit apartment complex located in Clearwater, Florida. In June 1992 the
Partnership purchased Woodbridge Apartments, a 168-unit apartment complex
located in Winter Park (Orlando), Florida. In August 1993 the Partnership
traded Woodbridge Apartments, and completed the trade in November 1993, for
Pelican Sound Apartments, a 379-unit apartment complex located in St.
Petersburg, Florida. In April 1994 Ashley Pointe Apartments was disposed with
the intent to trade for a replacement property not yet identified.
The business of the Partnership is not seasonal, although the Partnership's
properties may experience cyclical fluctuations in occupancy levels in the
rental markets where the apartments are located.
The Partnership is not dependent upon any single tenant or small groups of
tenants for its operating success. The loss of any one of or a small group of
tenants would not have a material adverse effect. The Partnership does not
foresee any events or market trends which would have a materially adverse
effect upon the Partnership's revenues, except for increased competition for
residents.
<PAGE> 4
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 4
The real estate operation of the Partnership, including the value of its real
estate holdings, may be affected by many factors over which the Partnership has
limited or no control, among them, changes in general and local economic
conditions, interest rate levels, availability and terms of financing, changes
in tax laws and fluctuations in operating costs. The principal factors
affecting rental rates and occupancy levels include location, ease of access,
amenities, and the quality of property management. The Partnership has
diversified its investments geographically and competes in several markets
including Madison, Wisconsin and Clearwater and St. Petersburg, Florida.
The real estate investment business is highly competitive. The Apartments are
in competition for residents with numerous other alternative sources of
housing, including apartment complexes owned by affiliates of the General
Partner. Many of these competitors may have greater assets than those of the
Partnership or may be associated with individuals with broader experience than
that of the General Partner. Additional residential rental projects may be
built which may compete directly with the Partnership's properties. In
addition, demand by purchasers for investment properties of the type owned by
the Partnership may increase or decrease. This competition is primarily based
on property location, condition, and asking rent. These factors may increase
or decrease the price of potential property acquisitions/sales.
During 1995, the Partnership did not employ any individuals. The Apartments
are managed by Decade Properties, Inc., an affiliate of the General Partner.
Employees of Decade Properties, Inc. perform the on-site management services
required to operate and maintain the Apartments. Employees of the General
Partner render partnership management services to the Partnership including
maintaining investor communications, compliance with tax laws and other
governmental agencies, and cash management.
Financial information for the last three years regarding revenue, operating
profit or loss, and identifiable assets attributable to each geographic area
are presented below. The Partnership operates exclusively in the United
States. The Partnership does not make any sales or transfers between
geographic areas.
<PAGE> 5
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 5
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(amounts in thousands)
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States total $ 5,680 $ 6,100 $ 5,190
St. Petersburg, Florida $ 2,435 $ 2,372 $ 189
Madison, Wisconsin $ 1,715 $ 1,916 $ 1,946
Clearwater, Florida $ 1,530 $ 1,489 $ 1,524
Orlando, Florida $ --- $ 323 $ 1,531
</TABLE>
Profit or (loss) from investment property operations (after
depreciation):
<TABLE>
<S> <C> <C> <C>
United States total $ (288) $ (297) $ (229)
St. Petersburg, Florida $ (234) $ (199) $ (97)
Madison, Wisconsin $ (209) $ 54 $ (2)
Clearwater, Florida $ 155 $ (76) $ 99
Orlando, Florida $ --- $ (76) $ (229)
Identifiable assets:
United States total $25,534 $26,467 $31,520
St. Petersburg, Florida $11,339 $11,764 $12,194
Madison, Wisconsin $ 8,352 $ 8,648 $ 8,961
Clearwater, Florida $ 5,843 $ 6,055 $ 6,304
Orlando, Florida $ 0 $ 0 $ 4,061
</TABLE>
At the close of business on December 31, 1995, the Partnership's 17,466.31
Interests were held by 1,936 Limited Partners. The General Partner of the
Partnership is Decade Companies - A General Partnership (of which Jeffrey
Keierleber and Decade 80, Inc. are the general partners). The principal office
of Decade Companies is located at 250 Patrick Blvd. Suite 140, Brookfield,
Wisconsin 53045-5864, Telephone (414) 792-9200.
Item 2. Description of Properties
The residential apartment complexes which are owned and operated by
the Partnership as of December 31, 1995 are:
<TABLE>
<CAPTION>
Rental
Name Location Units
---- -------- -----
<S> <C> <C>
Pelican Sound St. Petersburg, Florida 379
The Meadows II Madison, Wisconsin 316
Town Place Clearwater, Florida 240
</TABLE>
The Meadows II was acquired by the Partnership in January 1989.
<PAGE> 6
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 6
Town Place was acquired in February 1990 and Pelican Sound was acquired as of
November 1993.
The Meadows II is pledged as collateral against mortgage encumbrances of
approximately $6.7 million. Town Place is pledged as collateral against a
mortgage encumbrance of $2.5 million. Pelican Sound is pledged as collateral
against a mortgage encumbrance of $10 million.
The average monthly gross potential rent ("GPR") per unit at the Apartments for
the month of December and the related occupancy rate ("OR") for December of
each year is set forth below:
<TABLE>
<CAPTION>
Number December December December
of Units 1995 1994 1993
-------- -------- -------- --------
GPR OR GPR OR GPR OR
--- -- --- -- --- --
<S> <C> <C> <C> <C> <C> <C> <C>
Pelican Sound 379 $564 92% $549 97% $531 92%
The Meadows II 316 $560 92% $566 85% $557 89%
Town Place 240 $569 92% $551 90% $542 93%
</TABLE>
A brief description of each property follows:
PELICAN SOUND APARTMENTS
10200 Gandy Boulevard
St. Petersburg, Florida 33702
The apartments were built in 1988 and consist of 379 one and two bedroom air
conditioned living units with individual washers and dryers. The units range
in size from 505 square feet to 910 square feet. The complex consists of 13
two and three-story wooden frame with brick veneer garden apartment buildings
plus a 1,961 square foot clubhouse/leasing office on approximately 21.59 acres.
The complex includes a swimming pool with jacuzzi, two tennis courts, 569
parking spaces, and an exercise room available for all residents.
The complex is located in the "Gateway" region of St. Petersburg, on Gandy
Boulevard approximately one mile west of the Gandy Bridge. The location
provides easy access to both Pinellas and Hillsborough business districts and
is considered by the General Partner to be a positive growth area for both
commercial and residential developments.
The apartment mix and monthly asking rents at Pelican Sound Apartments is:
<PAGE> 7
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 7
<TABLE>
<CAPTION>
Number Asking Rent
of Square ------------------------
Style Units Feet 12/95 12/94 12/93
- ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
One-bedroom/one bath 128 505 $480-495 $475-490 $455-465
One bedroom/one bath 156 700 $565-590 $535-565 $515-545
One-bedroom/one bath/den 27 830 $625-650 $615-645 $605-680
Two-bedroom/two bath 68 910 $695-715 $680-710 $670-700
---
379
===
</TABLE>
THE MEADOWS II APARTMENTS (PHASES II, III, IV)
201-417 N. Thompson Drive
Madison, Wisconsin 53714
The Meadows Apartments consists of 404 apartment units in 32 two-story
buildings covering approximately 24 acres of land. The property was developed
in four phases; construction began in late 1976 and was completed in September
1980. On January 17, 1989 the Partnership acquired three of the four phases
comprising 316 of the 404 rental units. The other 88 rental units were
acquired by an affiliated limited partnership (Decade's Monthly Income &
Appreciation Fund). The apartments in Phases II, III, and IV were completed
between 1977 and 1980 and consists of one, two, and three-bedroom units in
twenty-four buildings. The entire complex has a total of 720 parking spaces
for a 1.78:1 ratio of stalls per unit. In addition to the apartment units, the
three phases owned by the Partnership have one swimming pool, one lighted
tennis court and a play area. Laundry room areas and storage lockers are
located in the basement of each building.
The Meadows is located at the southeast corner of the intersection of I-90/94
and Highway 30. The property is situated in a growing residential neighborhood
five miles northeast of Madison's Capitol Square. The primary access route is
Highway 30 on the north which meets East Washington Avenue. North-south
linkages are provided by I-90/94 and Highway 51. Most of the single family
homes in the area are newer and range in value from $75,000 to $95,000. Schenk
Elementary School is about one-half mile southwest of the property. Public bus
transportation is convenient with two bus stops servicing the property's
residents. The expansion of commercial development on major arterials west of
the neighborhood is believed to increase the desirability of the property's
location.
The apartment mix and monthly asking rents at The Meadows II Apartments is:
<PAGE> 8
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 8
<TABLE>
<CAPTION>
Number Asking Rent
of Square ---------------------
Style Units Feet 12/95 12/94 12/93
- ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
One-bedroom 88 625 $480-495 $505-515 $495
One-bedroom/deluxe 12 744 $490-505 $520-535 $515-525
Two-bedroom/one bath 192 875 $550-580 $585-605 $575-590
Two-bedroom/1.5 bath/den 12 1,466 $750-850 $795-825 $760-790
Three-bedroom 12 1,466 $750-850 $805-835 $760-790
---
316
===
</TABLE>
TOWN PLACE APARTMENTS
2545 N.E. Coachman Road
Clearwater, Florida 33575
The apartments were built in 1985 and consist of 240 one and two bedroom units.
The units range in size from 540 square feet to 1,036 square feet. The complex
consists of 24 buildings plus an office on approximately 25.7 acres. The
complex includes a swimming pool with jacuzzi, two tennis courts, volleyball
court, a 6.7 acre lake, clubhouse, 365 parking spaces, and a laundromat for all
residents.
The property is on the southside of N. E. Coachman Road approximately one mile
from the intersection of U.S. Highway 19 and Route 60. A Wal-Mart retail store
is located directly across the street. The area is mostly residential with no
industry or factories in the immediate area. Clearwater Beach is seven miles
from the property.
The apartment mix and monthly asking rents at Town Place Apartments is:
<TABLE>
<CAPTION>
Number Asking Rent
of Square ---------------------------
Style Units Feet 12/95 12/94 12/93
- ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
One-bedroom/Suite 36 540 $470 $455 $430
One bedroom/Garden 72 720 $515-540 $485-535 $475-525
Two-bedroom/one bath 36 836 $620-635 $580-600 $555-565
Two-bedroom/two bath 96 1,036 $655-725 $630-685 $605-650
---
240
===
</TABLE>
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
<PAGE> 9
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 9
Item 4. Submission of Matters to a Vote of Security Holders
No items were submitted to a vote of the security holders during the fourth
quarter.
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
Partner Matters
a) Market Information
There has not been a public market and it is not anticipated that a public
market for Limited Partnership Interests in the Partnership will develop.
However, the Agreement of Limited Partnership provides that the General Partner
may in its sole discretion utilize up to 2% of the gross proceeds of the
offering ($360,000) to repurchase Interests tendered to the Partnership by
Limited Partners who offer for repurchase fewer than 100 Interests in the
aggregate. Accordingly the Partnership repurchased Interests from Limited
Partners from 1989 through 1992 until 2% of the gross proceeds of the offering
were expended. This repurchase arrangement was intended only to provide a
potential for liquidity as to a limited number of Interests and was not
intended to provide a market for the Interests in general.
b) Security Holders
As of February 28, 1996, there were 1,936 Interest holders of record.
c) Dividends or Similar Distributions
During the last two years, quarterly cash distributions to Limited Partners
were declared at the rate of 5% per annum on the original capital investment.
Cash distributions declared to the Limited Partners for the two year period
ended December 31, 1995 were made as follows:
<TABLE>
<CAPTION>
Amount Distributed
Period Date -----------------------------
Ended Paid Total Per $1,000 Interest
------ ---- ----- -------------------
<S> <C> <C> <C>
03/31/94 04/22/94 $218,330 $12.50
06/30/94 07/22/94 $218,330 $12.50
09/30/94 10/21/94 $218,331 $12.50
12/31/94 01/20/95 $218,330 $12.50
03/31/95 04/28/95 $218,330 $12.50
06/30/95 07/25/95 $218,330 $12.50
09/30/95 10/23/95 $218,330 $12.50
12/31/95 01/26/96 $218,330 $12.50
</TABLE>
<PAGE> 10
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 10
The Agreement of Limited Partnership provides that the Partnership will make
quarterly distributions to all partners of Cash Available for Distribution
whereby 99% of all distributable cash, as defined in the Agreement of Limited
Partnership, will be distributed to the Limited Partners and 1% to the General
Partner.
The Partnership expects that comparable cash distributions will continue to be
paid in the future. However, the actual level of future cash distributions
will depend upon future Cash Flows generated by operations, capital
requirements, debt service requirements, financial condition, and working
capital requirements.
Item 6. Selected Financial Data
Selected Statement of Operations Data:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands of dollars, except per Interest data)
<S> <C> <C> <C> <C> <C>
Revenues associated with
rental properties $ 5,681 $ 6,100 $ 5,190 $ 4,875 $4,259
======= ======= ======= ======= ======
Income (Loss) from operations
of rental properties $ (288) $ (297) $ (229) $ 18 $ 66
======= ======= ======= ======= ======
Net Income (Loss) $ (470) $(1,314) $ (327) $ (326) $ (285)
======= ======= ======= ======= ======
Per Limited Partner Interest:
Cash distributions
declared $ 50 $ 50 $ 50 $ 45 $ 70
======= ======= ======= ======= ======
Net Income (Loss) $ (27) $ (74) $ (19) $ (18) $ (16)
======= ======= ======= ======= ======
Selected Balance Sheet Data:
</TABLE>
<TABLE>
<CAPTION>
December 31
--------------------------------------------
(in thousands of dollars)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $26,458 $27,914 $36,093 $25,515 $21,473
======= ======= ======= ======= =======
Long-Term Debt $19,229 $19,301 $25,330 $14,016 $ 9,169
======= ======= ======= ======= =======
</TABLE>
Certain matters that materially affect the comparability of the
<PAGE> 11
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 11
information include the purchase of the Woodbridge Apartments in June 1992, the
trade of Woodbridge Apartments for Pelican Sound Apartments which commenced in
August 1993 and was completed as of November 1993 and the disposition of Ashley
Pointe Apartments in April 1994. The fluctuation in total assets reflects not
only the real estate transactions, but also the annual depreciation for
financial statement purposes.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
The financial statements included in Item 8 present the operations and cash
flow for the three years ended December 31, 1995, 1994 and 1993 and present the
balance sheets as of December 31, 1995 and 1994.
The comparative presentation of operations reflects the operation of a
different number of apartment units during each period. The Partnership
operated several properties. During the entire three year period presented it
operated a 240-unit apartment complex known as Town Place Apartments located in
Clearwater, Florida, and a 316-unit apartment complex known as The Meadows II
(Phases II, III, and IV) located in Madison, Wisconsin. A 200-unit apartment
complex located in Orlando, Florida known as Ashley Pointe Apartments was
operated for all of 1993 and for four months in 1994. A 168-unit apartment
complex located in Winter Park (Orlando), Florida known as Woodbridge
Apartments was operated for eight months in 1993. Woodbridge was exchanged in
August 1993 for the 379-unit apartment complex known as Pelican Sound
Apartments located in St. Petersburg, Florida which was operated for the month
of December 1993 and all of 1994 and 1995.
The cash flow generated by rental operations during 1993, 1994 and 1995 was
affected by debt service requirements. The outstanding balance of the mortgage
loans on the Meadows II Apartments averaged $6.82 million during the three year
period presented. The outstanding balance of the mortgage loan on Ashley
Pointe Apartments averaged $1.9 million during the period operated until paid
off in April 1994. In August 1993 the Partnership borrowed an additional $4.0
million on Town Place Apartments for a total mortgage debt of $6.5 million.
The $4.0 million loan was paid off in December, 1994 and the $2.5 million loan
continues. In August 1993 the $2.5 million mortgage loan on Woodbridge
Apartments was paid off as part of the exchange for Pelican Sound Apartments.
With the acquisition of Pelican Sound Apartments as of November 1993, a $10
million mortgage loan was assumed and is still owed.
<PAGE> 12
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 12
The use of leverage is intended to assist the Partnership in meeting its
investment objective of achieving capital appreciation for the Limited
Partners. The total leverage on the three properties at year end is 62.2% of
the capitalized cost, compared to 62.8% at the end of 1994, down from 71.6% on
four properties at the end of 1993.
The use of mortgage financing creates unrelated business taxable income
("UBTI") for Qualified Plan investors, but it is anticipated that very few
qualified plans will receive an allocation of more than $1,000 of UBTI for
federal income tax purposes. The UBTI for 1995 was approximately $29 per
$1,000 Limited Partner Interest.
The comparative presentation of other income reflects the yield on portfolios
that were not of equal size. In August 1993 $4 million was borrowed against
Town Place Apartments and was invested in short-term bank certificates of
deposit, which were redeemed to pay off the $4 million loan on December 1,
1994.
During 1995, cash and cash equivalents increased by $40,000 from $16,000 at
December 31, 1994 to $56,000 at December 31, 1995. During 1995, approximately
$656,000 was generated by operating activities, a net amount of $443,000 was
provided by investing activities, and approximately $1.06 million was used in
financing activities as shown herein on the Statements of Cash Flows.
During 1995, the Exchange Escrow from the Ashley Pointe transaction was reduced
by $620,000 to provide funds for investing and financing activities as set
forth herein on the Statements of Cash Flows.
Liabilities decreased by approximately $109,000 from $23.5 million at December
31, 1994 to $23.4 million at December 31, 1995. The decrease in liabilities is
primarily attributable to the decrease in mortgage notes of $72,000 on The
Meadows II and the net reduction of the line-of-credit note to the bank of
$100,000. Payables to affiliates increased $23,000 for interest on unpaid
fees. The actual payment of fees and accrued interest to the General Partner
is restricted as set forth in the Partnership Agreement. Distributions payable
to partners increased $1,000 from 1994 to 1995. Other increases in liabilities
included security deposits of $3,000, accounts payable of $27,000, and accrued
real estate taxes of $9,000.
Partners' Capital decreased by $1,347,000 during 1995. The decrease was
attributable to the net loss of $470,000 for financial reporting purposes
(after depreciation and amortization of $1,127,000) and $877,000 of
distributions declared to the Partners.
<PAGE> 13
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 13
The Partnership is attempting to refinance the $2.5 million mortgage loan on
Town Place Apartments. Although a loan commitment has not as yet been
executed, it is likely that the new mortgage loan will be obtained in an amount
of $6.5 to $6.7 million. If such mortgage loan is obtained, the debt service
requirements will have an impact on future operations.
The proposed 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.
The Partnership Agreement sets termination of the Partnership at December 31,
2005. However, at the time of originating the Partnership, the General Partner
anticipated that the Partnership would dispose of its properties and complete
liquidation within seven to nine years after the Partnership's acquisition of
its investment properties. The Partnership acquired four properties between
December 1986 and February 1990. Using these four purchases as a starting
point, an estimated termination date was originally contemplated to start as
early as February 1997 and as late as February 1999.
Of course, there was no assurance that the start of liquidation of the
Partnership's properties would occur by then. The determination of whether a
particular property should be sold or otherwise disposed of is made after a
consideration of relevant factors, including performance of the property and
market conditions, with a view toward achieving the principal investment
objectives of the Partnership.
In order for the Partnership to meet its stated investment objectives, 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
<PAGE> 14
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 14
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
Apartments and possibly trade for another property. Accordingly, liquidation
of the Partnership is not anticipated to begin before 1999.
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 anticipated net proceeds from refinancing the Town
Place mortgage 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. 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 property 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. Limited Partners
who choose to tender their Interests would, in effect, be exchanging the
certainty and liquidity of a current sale for the potentially higher return (or
risk of loss) of continued ownership of their Interests. A decision with
respect to any such offer and the use of proceeds from refinancing the Town
Place mortgage note is expected to be made in 1996.
Results of Operations
The Statements of Operations present a three-year comparison of operations
divided into two separate categories: investment property operations and other
income (expenses).
There are certain transactions that have materially effected the comparability
of rental revenues and operating expenses. When comparing the results of
operations for each year it should be
<PAGE> 15
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 15
noted that Woodbridge Apartments was operated for seven and one-half months in
1993. Pelican Sound Apartments was operated for one month in 1993 and all of
1994 and 1995. Ashley Pointe Apartments was operated for four months in 1994,
and all of 1993.
Revenues from 1995 rental operations decreased $419,000 from the prior year,
compared to an increase of $910,000 in 1994. The decrease in 1995 was
comprised of decreases at Ashley Pointe ($323,000), and The Meadows II
($201,000), offset by increases at Pelican Sound ($63,000) and Town Place
($42,000). Occupancy of The Meadows II Apartments declined from 80% in
January 1995 to 70% in June. Asking rents at The Meadows II were reduced in
July resulting in an increase in occupancy to an 81% average in the third
quarter and a 91% average in the fourth quarter, and rent collections for the
first quarter of 1996 are now greater than rent collections for any quarter in
1995. Occupancy at The Meadows II stood at 92% at year end. A summary of
total operating revenue by apartment site follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Pelican Sound $2,435,000 $2,372,000 $ 189,000
The Meadows II 1,715,000 1,916,000 1,946,000
Town Place 1,531,000 1,489,000 1,524,000
Ashley Pointe --- 323,000 948,000
Woodbridge --- --- 583,000
---------- ---------- ----------
Total $5,681,000 $6,100,000 $5,190,000
========== ========== ==========
</TABLE>
Rental expenses for 1995 before depreciation and debt service decreased
$68,000, compared to an increase of $321,000 in 1994. The 1995 decrease was
comprised of a decrease at Ashley Pointe ($232,000), offset by increases at
Pelican Sound ($83,000), The Meadows II ($48,000) and Town Place ($33,000). A
summary of operating expenses before depreciation and debt service by apartment
site follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Pelican Sound $1,436,000 $1,353,000 $ 112,000
The Meadows II 1,067,000 1,019,000 1,021,000
Town Place 875,000 842,000 839,000
Ashley Pointe --- 232,000 773,000
Woodbridge --- --- 380,000
---------- ---------- ----------
Total $3,378,000 $3,446,000 $3,125,000
========== ========== ==========
</TABLE>
The decrease in operating revenue of $419,000, offset by the decrease in
operating expenses of $68,000, resulted in a $351,000 decrease in net operating
income from property operations before depreciation and debt service for 1995
compared to an increase in 1994 of $589,000 over the prior 1993 year. The 1995
decrease was comprised of decreases at The Meadows II ($249,000), Ashley Pointe
<PAGE> 16
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 16
($90,000), and Pelican Sound ($20,000), offset by an increase at Town Place of
$8,000. A summary of operating income before depreciation and debt service by
apartment site follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Pelican Sound $ 999,000 $1,019,000 $ 72,000
The Meadows II 648,000 894,000 925,000
Town Place 656,000 648,000 685,000
Ashley Pointe --- 90,000 175,000
Woodbridge --- --- 203,000
---------- ---------- ----------
Total $2,303,000 $2,654,000 $2,065,000
========== ========== ==========
</TABLE>
Interest expense decreased $228,000 in 1995 compared to an increase of $523,000
in 1994. The decrease in 1995 was comprised of decreases for Town Place
($190,000) and Ashley Pointe ($56,000), offset by an increase for The Meadows
II of $18,000.
After considering the effect of interest expense, net income before
depreciation was $823,000 in 1995 compared to $946,000 in 1994, and $881,000 in
1993. A summary of net income before depreciation by apartment site follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Pelican Sound $ 277,000 $ 297,000 $ 15,000
The Meadows II 140,000 407,000 424,000
Town Place 406,000 208,000 376,000
Ashley Pointe --- 34,000 12,000
Woodbridge --- --- 54,000
---------- ---------- ---------
Total $ 823,000 $ 946,000 $ 881,000
========== ========== =========
</TABLE>
The net income from real estate activities is partially sheltered by deductions
for depreciation and amortization which did not affect cash flow. Depreciation
and amortization decreased $83,000 from 1993 to 1994 and decreased $132,000
from 1994 to 1995.
As a result, net loss from investment properties operations for 1995 was
$288,000, compared to a net loss of $297,000 in 1994, and a net loss of
$229,000 in 1993.
Other expense, net of other income, decreased approximately $836,000 in 1995
from 1994 compared to an increase of $919,000 in 1994 from 1993.
The average monthly gross potential rent per unit at the Apartments for the
three year period was:
<PAGE> 17
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 17
<TABLE>
<CAPTION>
Number
of Units 1995 1994 1993
-------- ---- ---- ----
<S> <C> <C> <C> <C>
Pelican Sound 379 $557 $537 $531
The Meadows II 316 $567 $559 $550
Town Place 240 $561 $548 $535
Ashley Pointe 200 N/A $485 $484
Woodbridge 168 N/A N/A $527
</TABLE>
"Gross potential rent" represents the asking rent established by the
Partnership for a vacant apartment plus the rent in effect for occupied
apartments. As a general rule the asking rents are the same as the actual
rents eventually established by the rental agreements.
The average occupancy level at the Apartments for the three year period was:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
All Apartments 89% 92% 92%
Pelican Sound 93% 94% 92%
The Meadows II 80% 90% 93%
Town Place 93% 93% 95%
Ashley Pointe N/A 86% 83%
Woodbridge N/A N/A 94%
</TABLE>
The range of occupancy levels at the Apartments for the years was:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Pelican Sound 91.3-96.9% 91.1-96.6% 92.0%
The Meadows II 69.8-91.9% 85.1-94.4% 88.5-95.6%
Town Place 90.5-97.0% 88.8-97.9% 90.8-98.0%
Ashley Pointe N/A 80.7-87.8% 80.1-86.5%
Woodbridge N/A N/A 90.1-96.7%
</TABLE>
The differences in occupancy levels were primarily related to the Partnership's
asking rents compared to other competitors in the market place.
Liquidity
At December 31, 1995 there was approximately $740,000 of cash and cash
equivalents and escrow deposits versus total liabilities of approximately $23.4
million. Approximately $2.7 million of mortgage liabilities can be classified
as short-term debt, with the balance of $16.5 million as long-term debt. Cash
increased
<PAGE> 18
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 18
approximately $40,000 during the year.
Investment property operations generated a profit of $839,000 (before
depreciation and amortization of $1,127,000) compared to $962,000 in 1994 and
$947,000 in 1993.
Cash flow of $656,000 was generated by operating activities during 1995 as
shown on the Statements of Cash Flows in the annual financial statements. The
1995 cash flow was used to make cash distributions to the partners of $876,000.
Approximately $620,000 of cash from the Ashley Pointe Exchange Escrow was used
to supplement the cash distribution to partners, to make principal reductions
on mortgage notes payable of $72,000, to make additions to investment
properties of $177,000, to pay debt issue costs of $10,000, and to reduce a
bank line-of-credit note by $220,000.
On a short-term basis, rental operations are expected to provide a stream of
cash flow. Payment of day-to-day operating expenses is provided by cash flow
from operations and does not require the use of cash reserves.
The Partnership intends but is not required to declare cash distributions in
1996 to the Limited Partners at the rate of 5.0% per annum on the original
capital investment. This intention will require cash distributions to the
limited partners of approximately $873,000 during 1996. It is anticipated that
1996 operations at The Meadows II will improve over the 1995 results to provide
additional cash flow available for distribution necessary to maintain the
current level of cash distribution.
Scheduled mortgage debt principal reductions are approximately $203,000 in 1996
(excluding a $2.5 million balloon payment due on April 1, 1996 secured by the
Town Place Apartments mortgage). It is anticipated that the mortgage debt
secured by Town Place will be refinanced during 1996 and a $10,000 security
deposit has been paid to a lender to obtain such financing.
The Partnership intends to increase the mortgage debt on Town Place to provide
cash reserves to fund the anticipated 1996 capital improvements and scheduled
principal reductions, and to provide liquidity.
The $250,000 bank line-of-credit expired in January 1996 and is no longer
available to provide liquidity. A $4 million bank loan agreement expires in
June 1996, but requires cash collateral of equal amount and therefore cannot be
relied upon to provide liquidity. The purpose of such agreement was to assist
in the mortgage refinancing of Town Place.
<PAGE> 19
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 19
There are no long-term material capital expenditures, obligations, or other
demands or commitments that might impair the liquidity of the Partnership.
Capital Resources
At December 31, 1995 no material commitments existed to acquire additional
property or to make capital expenditures.
Pursuant to the terms of the Limited Partnership Agreement no Limited Partner
shall be subject to assessment nor shall any Limited Partner be personally
liable for any debts of the Limited Partnership. The Partnership completed its
$18 million offering of Limited Partner Interests in 1988. There are no plans
to raise additional capital by selling additional Limited Partner Interests.
Such action would require the approval of the Limited Partners.
Environmental Matters
The Partnership is subject to various laws and governmental regulations
concerning environmental matters and employee safety and health in the United
States. U.S. federal environmental legislation having particular impact on the
Partnership includes the Toxic Substances Control Act; the Resources
Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Safe
Drinking Water Act; and the Comprehensive Environmental Response, Compensation
and Liability Act (also known as Superfund). The Partnership also is subject
to the Occupational Safety and Health Administration (OSHA) concerning employee
safety and health matters. The United States Environmental Protection Agency
(EPA), OSHA, and other federal agencies have the authority to promulgate
regulations that have an impact on the Partnership's operations.
In addition to these federal activities, various states have been delegated
certain authority under the aforementioned federal statutes. Many state and
local governments have adopted environmental and employee safety and health
laws and regulations, some of which are similar to federal requirements. State
and federal authorities may seek fines and penalties for violation of these
laws and regulations.
The Partnership is committed to a long-term environmental protection program
that reduces emissions of hazardous materials into the environment, as well as
to the remediation of identified existing environmental concerns.
The General Partner is not aware of any hidden or unapparent conditions of the
property, subsoil or structural conditions which
<PAGE> 20
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 20
would render the Apartments more or less valuable. The General Partner is not
aware of the existence of potentially hazardous materials used in the
construction or maintenance of the buildings, such as the presence of
urea-formaldehyde foam insulation, and/or the existence of toxic waste, which
may or may not be present at the Apartments. The General Partner is not aware
of any groundwater contamination, underground methane gas or radon gas. The
General Partner believes that the Apartments do not produce air emissions or
waste water of environmental concern. The General Partner is not aware of any
underground storage tanks. The General Partner is not aware of any incidents
of spills, dumping or discharges at the property/or the presence of hazardous
substances. A Phase I Environmental Site Assessment has been performed at
Pelican Sound and Town Place but has not been performed at The Meadows II.
The Partnership did not have any expenditures in 1995 for environmental capital
projects or for operation and maintenance of environmental protection
facilities. The Partnership estimates that during 1996 and 1997 no material
amount will be spent on capital projects for environmental protection.
Impact of Recently Issued Accounting Standards
In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Partnership will adopt
Statement 121 in the first quarter of 1996 and, based on current circumstances,
does not believe the effect of adoption will be material.
Impact of Inflation
Although inflation has slowed in recent years, it is still a factor in the
economy and the Partnership continues to seek ways to mitigate its impact. To
the extent permitted by competition, in general the Partnership passes
increased costs on by increasing asking rents over time. Operating revenue
associated with rental properties reported in the Partnership's financial
statements have varied in the last three years from $5.19 million in 1993 to
$6.10 million in 1994 (a 17.5% increase) to $5.97 million in 1995 (a 6.8%
decrease). The fluctuating revenue is due to changes in asking rents and
changes in the number of rental units available. While
<PAGE> 21
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 21
Ashley Pointe was sold in 1994, the acquisition of Pelican Sound Apartments as
of November 1993 increased the number of apartment units available for rent in
1993, 1994 and 1995. Gross potential rent at Pelican Sound was $2,534,000
compared to $2,450,000 in 1994, an increase of 3.4%. Gross potential rent at
The Meadows II increased from $2,084,000 in 1993 to $2,122,000 in 1994 (a 1.8%
increase) and to $2,149,000 in 1995 (a 1.3% increase). Gross potential rent at
Town Place increased from $1,541,000 in 1993 to $1,582,000 in 1994 (a 2.7%
increase) and to $1,616,000 in 1995 (a 2.1% increase). The Partnership
attempts to pass most cost increases through to the residents by adjusting the
asking rents for apartments. The General Partner believes that the ability to
increase rental rates on apartment units should offset any adverse effects from
inflation on the Partnership's cost of operations. The General Partner
anticipates that demand for residential rental units in the Madison, Wisconsin
and Clearwater and St. Petersburg, Florida areas will remain stable to high.
Real estate held for production is accounted for the same way as productive
assets are accounted for in other industries. Such assets are normally carried
at historical cost less accumulated depreciation. However, real estate is
generally considered to be a hedge against inflation by typically increasing in
value rather than depreciating. Appreciation results from both inflation and
supply and demand factors. The charges to operations for depreciation
represent the allocation of historical costs incurred over past years and are
significantly less than if they were based on the current cost of replacing the
property. Three types of depreciation affect the economic value of the real
estate: physical depreciation such as wear and tear, functional depreciation or
obsolescence, such as outmoded or poor design, layout or fixtures, and economic
depreciation or obsolescence, caused by factors outside the property itself,
such as a declining neighborhood. Depreciation for financial statement
purposes is the systematic allocation of the cost of a property to separate
fiscal periods. Such write-off does not necessarily relate to an actual
decline in the value of a property.
The Partnership's investment in the Apartments currently owned was made between
January 1989 and November 1993. The various Apartments were constructed over a
period of time ranging from 1975 to 1987. The Apartments have an estimated
remaining useful life ranging up to 29 years for buildings and improvements as
of December 31, 1995. Carpeting, appliances, and other furnishings and
equipment are depreciated over five years for financial statement purposes.
Capitalized additions will, of course, be replaced at higher costs but this
will take a number of years. These new assets will result in higher
depreciation charges; but in
<PAGE> 22
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 22
many cases, due to technological improvements, there should be operating cost
savings as well. It is not the intention of the Partnership to hold the
investment properties until fully depreciated economically. The Partnership
considers these matters in setting its pricing policies with respect to asking
rents.
The value of the Partnership's Apartments can be affected by inflation in a
number of ways. To the extent that general inflation in the economy has the
effect of increasing the general level of interest rates, the value of the
Partnership's property could be adversely affected, inasmuch as prospective
purchasers of the Apartments may be unable to secure suitable financing for
their purchase. Also, higher interest rates could affect the ability of the
Partnership to secure suitable financing for a replacement property should any
Apartments be traded.
Conversely, inflation which results in higher real estate values could serve to
enhance the Partnership's revenues, particularly to the extent that when the
Partnership elects to sell the Apartments it is thereby able to do so at higher
prices.
Inflation had no material effect on the results of operations in 1995, 1994,
and 1993.
Item 8. Financial Statements and Supplementary Data
The response to this Item is submitted in a separate section of this report.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
There have been no disagreements with Ernst & Young LLP, the Partnership's
independent auditors, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
Part III
Item 10. Directors and Executive Officers of the Registrant
(a) Neither the Partnership nor Decade Companies, its General Partner, has a
Board of Directors.
(b) & (e) The names, ages and business experience of the general partners of
Decade Companies are as follows:
Mr. Jeffrey Keierleber (age 42), graduated with a BBA in 1975 and
<PAGE> 23
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 23
an MBA in 1977 from the University of Wisconsin. Since that time, Mr.
Keierleber has worked exclusively in the real estate and real estate
syndication fields, and is actively involved in all its aspects, including
property management, real estate investment, acquisitions, liquidations,
limited partnership management and broker/dealer relations. Mr. Keierleber is
responsible for the acquisition of investment property having a market value of
over $150,000,000, and has assisted in the structuring of more than 35 limited
partnerships. These partnerships have invested in real estate located in the
midwest and the southeast.
Mr. Keierleber is a licensed real estate broker and securities agent. He is
the sole Director of the Corporate General Partner for various limited
partnerships and serves as a co-General Partner in the public limited
partnerships sponsored by Affiliates of Decade Companies, and he is a General
Partner in all of the non-public limited partnerships sponsored by Affiliates
of Decade Companies. Mr. Keierleber is a shareholder, officer, and director of
a number of affiliated corporations.
Decade 80, Inc., a corporation wholly owned by Mr. Keierleber, was admitted as
a general partner of the General Partner in December 1992. Mr. Keierleber is
to sole director and President of Decade 80, Inc. and Mr. Michael G. Sweet is
its Secretary.
(c) & (e) The names, ages and business experience of significant employees of
the General Partner and its affiliates are as follows:
Mr. Steven Cooper (age 51), is a Certified Property Manager and is
Vice-President of Decade Properties, Inc. Mr. Cooper earned his BS Degree at
Purdue University in Lafayette, Indiana in 1967. Prior to joining Decade in
1989, Mr. Cooper worked eighteen years in property management.
Mr. Michael G. Sweet (age 46), is a Certified Public Accountant and is the
Controller of Decade Companies, Partnership Manager of the Decade-sponsored
partnerships, and an officer and/or director of various affiliated entities.
Mr. Sweet received a BS degree with an accounting major from Marquette
University in Milwaukee, Wisconsin in 1972. Prior to joining Decade in 1982,
Mr. Sweet worked ten years in public accounting. Mr. Sweet holds a Series 27
License as a Financial and Operations Principal with Decade Securities Corp.
He is a member of both the American Institute of Certified Public Accountants
and the Wisconsin Institute of Certified Public Accountants.
(d) There is no family relationship between any of the foregoing individuals.
<PAGE> 24
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 24
(f) Involvement in certain legal proceedings. None.
Item 11. Executive Compensation
(a) Cash compensation
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payout
- ----------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (I)
- ----------------------------------------------------------------------------------
Other Securities
Name Annual Restricted Under- All Other
and Compen- Stock lying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs ($) ($) ($)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1) (2)
Jeffrey
Keierleber 1995 -0- -0- -0- -0- -0- -0- -0-
CEO 1994 -0- -0- -0- -0- -0- -0- -0-
1993 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
(1) The Partnership does not have a chief executive officer ("CEO").
Jeffrey Keierleber is the individual general partner of the General
Partner and serves in the capacity of CEO.
(2) Entities controlled by or affiliated with Jeffrey Keierleber receive
other compensation for services as set forth in Item 13 herein.
(b) Compensation pursuant to plans: No cash or non-cash compensation has been
paid or distributed during the last fiscal year to the general partners of
Decade Companies.
(c) Other compensation: None
(d) Compensation of directors. None.
(e) Termination of employment and change of control arrangement. None.
(j) Additional Information with Respect to Compensation Committee
<PAGE> 25
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 25
Interlock and Insider Participations. N/A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No person owns of record or is known by the Partnership to own beneficially
more than 5% of the outstanding Limited Partnership Interests.
(b) Decade Companies and its partners as a group own the following Limited
Partner Interests of the Partnership as of December 31, 1995:
<TABLE>
<CAPTION>
Title of Class Amount Owned Percent of Class
-------------- ------------ ----------------
<S> <C> <C>
Limited Partner Interests 193.04 1.105%
</TABLE>
Relatives and affiliates of the General Partner own 35.69 additional
Interests.
(c) Changes in control. None.
Item 13. Certain Relationships and Related Transactions
(c) No management person is indebted to the Partnership.
(a, b & d)
Decade Companies, the General Partner of the Partnership, was reimbursed for
expenses of $89,962 in 1995.
Decade Properties, Inc., wholly-owned by Jeffrey Keierleber, the Managing
General Partner of Decade Companies, the General Partner of the Partnership,
manages the Apartments. During 1995 Decade Properties, Inc. earned property
management fees of $449,205, reimbursed expenses of $929,883 including the site
property management staff, and interest on sales commissions of $28,588 (earned
but not paid, and subordinated as set forth in the Partnership Agreement).
The Partnership is required to pay a distributive share of cash flow to the
General Partner. When and as quarterly cash distributions are made to the
Limited Partners, 99% of all distributable cash, as defined in the Agreement of
Limited Partnership, will be distributed to the Limited Partners and 1% to the
General Partner. As of December 31, 1995, cash distributions amounting to
$3,867 were accrued but not paid to the General Partner. The distributions
paid to the General Partner during 1995 amounted to $2,977.
When the Partnership sells or refinances Partnership property, the net sale
proceeds resulting therefrom after repayment of any General
<PAGE> 26
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 26
Partner's loan and payment of deferred fees, will be distributed to Limited
Partners until such time as they have received a return of their capital
investment plus any deficiency in their 6% cumulative priority return. The
remaining sale or refinancing proceeds available for distribution will be
distributed 88% to the Limited Partners and if, after the foregoing
distributions of net sale proceeds, the Limited Partners have not received
their capital investment plus a cumulative preference of 10% per annum on their
capital investment, they will receive an amount equal to the amount of such
deficiency in such return and any balance remaining, not to exceed 12% of the
net sale proceeds, will be distributed to the General Partner.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements
The following financial statements of Decade Companies
Income Properties - A Limited Partnership are included in
Item 8:
Balance Sheets, December 31, 1995 and 1994
Statements of Operations for the years ended
December 31, 1995, 1994 and 1993
Statements of Changes in Partners' Capital for
the years ended December 31, 1995, 1994, and 1993
Statements of Cash Flows for the years ended
December 31, 1995, 1994, and 1993
Notes to Financial Statements, December 31, 1995
(2) Financial Statement Schedules
The following financial statement schedules of Decade Companies
Income Properties - A Limited Partnership are required and the
contents have been included in the Financial Statements in Item
8 and the Notes thereto:
Schedule XI--Real Estate and Accumulated Depreciation.
Schedule XII--Mortgage Loans on Real Estate
All other schedules for which provision is made in the
<PAGE> 27
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 27
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
(3) Listing of Exhibits
Description
Exhibit 3 Certificate of Limited Partnership, previously
filed with Registration Statement on August 28,
1985.
Exhibit 10 Forms of Material Contracts
(A) Acquisitions Agreement, previously filed
with Registration Statement on August 28,
1985.
(B) Management Consulting Agreement, previously filed with
Registration Statement on August 28, 1985.
(C) Property Management Agreement, previously
filed with Registration Statement on August
28, 1985.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K filed in the fourth quarter of 1995. None.
(c) Exhibits--The response to this portion of item 14 is submitted in Item
14(a)(3) herein.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted in Item 14 (a)(2) of this
report.
<PAGE> 28
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
----------------------------------
(Registrant)
Decade Companies
----------------------------------
General Partner
March 28, 1996 By /s/ Jeffrey L. Keierleber
----------------------------------
Dated Jeffrey L. Keierleber, General Partner of Decade
Companies
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed in the capacities and on the dates indicated.
March 28, 1996 By /s/ Jeffrey L. Keierleber
----------------------------------
Dated Jeffrey L. Keierleber, Principal Executive
Officer and Principal Financial and Accounting
Officer of the Registrant
<PAGE> 29
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
YEAR ENDED DECEMBER 31, 1995
DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP
BROOKFIELD, WISCONSIN
<PAGE> 30
Decade Companies Income Properties
Annual Report on Form 10-K
For year ended December 31, 1995
Page 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
-----------------------------------------------------
(Registrant)
Decade Companies
-----------------------------------------------------
General Partner
March 28, 1996 By /s/ Jeffrey L. Keierleber
- --------------- ----------------------------------------------
Dated Jeffrey L. Keierleber, General Partner of Decade
Companies
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report had been signed in the capacities and on the dates indicated.
March 28, 1996 By /s/ Jeffrey L. Keierleber
- --------------- ----------------------------------------------
Dated Jeffrey L. Keierleber, Principal Executive
Officer and Principal Financial and Accounting
Officer of the Registrant
<PAGE> 31
FINANCIAL STATEMENTS AND
OTHER FINANCIAL INFORMATION
DECADE COMPANIES INCOME
PROPERTIES-A LIMITED PARTNERSHIP
Years ended
December 31, 1995 and 1994
<PAGE> 32
Decade Companies Income Properties-
A Limited Partnership
Financial Statements
and Other Financial Information
Years ended December 31, 1995 and 1994
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . 1
Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . . . . . 3
Statements of Changes in Partners' Capital . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . 6
Other Financial Information
Report of Independent Auditors on Other Financial Information . . 19
Details of Income (Loss) from Investment Property Operations . . . 20
</TABLE>
<PAGE> 33
Report of Independent Auditors
The Partners
Decade Companies Income Properties-A Limited Partnership
We have audited the accompanying balance sheets of Decade Companies Income
Properties-A Limited Partnership (the Partnership) as of December 31, 1995 and
1994, and the related statements of operations, changes in Partners' capital and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Decade Companies Income
Properties-A Limited Partnership as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
January 26, 1996
1
<PAGE> 34
Report of Independent Auditors
The Partners
Decade Companies Income Properties-A Limited Partnership
We have audited the accompanying balance sheets of Decade Companies Income
Properties-A Limited Partnership (the Partnership) as of December 31, 1995 and
1994, and the related statements of operations, changes in Partners' capital and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Decade Companies Income
Properties-A Limited Partnership as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
January 26, 1996
1
<PAGE> 35
Decade Companies Income Properties--
A Limited Partnership
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
-------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 56,316 $ 16,415
Exchange escrow (Note 4) 497,390 1,117,531
Prepaid expenses and other assets 137,820 81,220
Escrow deposits 186,703 178,881
Investment properties, at cost:
Land 5,305,536 5,305,536
Buildings and improvements 23,308,727 23,304,606
Equipment 2,312,974 2,139,760
-------------------------
30,927,237 30,749,902
Less accumulated depreciation 5,393,539 4,282,571
-------------------------
25,533,698 26,467,331
Debt issue costs, net of accumulated amortization
($88,193--1995; $71,836--1994) 46,440 52,797
-------------------------
$26,458,367 $27,914,175
=========================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Tenant security deposits $ 169,369 $ 166,677
Accounts payable 81,354 53,874
Accrued real estate taxes 269,368 260,514
Accrued interest payable 37,971 37,872
Distributions payable 221,154 220,264
Payables to affiliates 3,409,338 3,386,016
Note payable to bank - 100,000
Mortgage notes payable 19,228,533 19,300,793
-------------------------
23,417,087 23,526,010
Partners' capital:
General Partner (deficit) (69,185) (60,621)
Limited Partners (interests authorized--18,000;
interests outstanding--17,466.31 in
1995 and 1994) 3,110,465 4,448,786
-------------------------
3,041,280 4,388,165
-------------------------
$26,458,367 $27,914,175
=========================
</TABLE>
See accompanying notes.
2
<PAGE> 36
Decade Companies Income Properties--
A Limited Partnership
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Operating revenue associated with
investment properties:
Rentals $5,526,011 $ 5,941,610 $5,019,399
Other 154,528 158,286 171,053
--------------------------------------------
5,680,539 6,099,896 5,190,452
Operating expenses associated with
investment properties:
Operating 2,336,602 2,394,388 2,264,054
Administrative 300,830 289,678 272,762
Depreciation 1,110,967 1,242,885 1,109,669
Interest, including amortization of
debt issue costs 1,479,874 1,707,904 1,184,747
Real estate taxes 740,582 761,975 588,386
--------------------------------------------
5,968,855 6,396,830 5,419,618
--------------------------------------------
Loss from operations of investment
properties (288,316) (296,934) (229,166)
Other Partnership income (expenses):
Interest income 43,069 177,404 94,736
Interest on payables to affiliates (33,550) (28,764) (18,259)
Administrative expenses (190,901) (194,405) (174,514)
Loss on disposition of investment property - (1,071,710) -
Forfeiture fee earned - 100,000 -
--------------------------------------------
(181,382) (1,017,475) (98,037)
--------------------------------------------
Net loss $ (469,698) $(1,314,409) $ (327,203)
============================================
Net loss attributable to General
Partner (1%) $ (4,697) $ (13,144) $ (3,272)
Net loss attributable to Limited
Partners (99%) (465,001) (1,301,265) (323,931)
--------------------------------------------
$ (469,698) $(1,314,409) $ (327,203)
============================================
Net loss per Limited Partnership interest $ (26.62) $ (74.50) $ (18.55)
============================================
</TABLE>
See accompanying notes.
3
<PAGE> 37
Decade Companies Income Properties--
A Limited Partnership
Statements of Changes in Partners Capital
<TABLE>
<CAPTION>
General
Limited Partner's Limited
Partnership Capital Partners'
Interests (Deficit) Capital Total
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at January 1, 1993 17,466.31 $(32,010) $ 7,820,623 $ 7,788,613
Distributions to Partners - (6,061) (873,320) (879,381)
Net loss for the year - (3,272) (323,931) (327,203)
---------------------------------------------------------
Balances at December 31, 1993 17,466.31 (41,343) 6,623,372 6,582,029
Distributions to Partners - (6,134) (873,321) (879,455)
Net loss for the year - (13,144) (1,301,265) (1,314,409)
---------------------------------------------------------
Balances at December 31, 1994 17,466.31 (60,621) 4,448,786 4,388,165
Distributions to Partners - (3,867) (873,320) (877,187)
Net loss for the year - (4,697) (465,001) (469,698)
---------------------------------------------------------
Balances at December 31, 1995 17,466.31 $(69,185) $ 3,110,465 $ 3,041,280
=========================================================
</TABLE>
( ) Denotes deduction or deficit.
See accompanying notes.
4
<PAGE> 38
Decade Companies Income Properties--
A Limited Partnership
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for the year $ (469,698) $ (1,314,409) $ (327,203)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 1,110,967 1,242,885 1,109,669
Loss on disposition of investment property - 979,610 -
Amortization of debt issue costs 16,357 16,302 66,910
Changes in operating assets and liabilities:
Prepaid and other assets (56,600) 42,464 (65,579)
Escrow deposits (7,822) 2,686 (6,648)
Security deposits payable 2,692 (29,945) 33,274
Accounts payable 27,480 (67,453) 50,729
Accrued real estate taxes 8,854 (9,407) (5,332)
Accrued interest payable 99 (43,453) 18,369
Payables to affiliates 23,322 101,350 37,609
-----------------------------------------------
Net cash provided by operating activities 655,651 920,630 911,798
INVESTING ACTIVITIES
Proceeds from disposition of investment property - 2,990,181 5,326,313
Withdrawal from (deposit to) Like-Kind Exchange
Escrow Trust 620,141 (1,117,531) -
Net additions to investment properties (177,334) (159,791) (2,935,771)
Redemption (purchase) of short-term investments - 4,000,000 (4,000,000)
-----------------------------------------------
Net cash provided by (used in) investing activities 442,807 5,712,859 (1,609,458)
FINANCING ACTIVITIES
Net proceeds from issuance of mortgage note payable - - 4,000,000
Proceeds from note payable to bank 120,000 100,000 -
Payments on note payable to bank (220,000) - -
Additions to debt issue costs (10,000) (13,606) (12,500)
Payments on mortgage notes payable (72,260) (6,029,737) (2,685,753)
Distributions paid to Limited Partners (873,320) (873,320) (873,320)
Distributions paid to General Partner (2,977) (12,668) -
-----------------------------------------------
Net cash provided by (used in) financing activities (1,058,557) (6,829,331) 428,427
-----------------------------------------------
Increase (decrease) in cash and cash equivalents 39,901 (195,842) (269,233)
Cash and cash equivalents at beginning of year 16,415 212,257 481,490
-----------------------------------------------
Cash and cash equivalents at end of year $ 56,316 $ 16,415 $ 212,257
===============================================
</TABLE>
See accompanying notes.
5
<PAGE> 39
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION AND BASIS OF ACCOUNTING
ORGANIZATION
Decade Companies Income Properties-A Limited Partnership (the Partnership) was
organized as a limited partnership under the laws of the State of Wisconsin
pursuant to a Certificate and an Agreement (the Agreement) of Limited
Partnership dated June 6, 1985, for the purpose of investing primarily in
residential and commercial real property. The Agreement terminates on or before
December 31, 2005. The Partnership began operations June 9, 1986. The
Partnership operates three residential apartment complexes located in Madison,
Wisconsin, Clearwater, Florida, and St. Petersburg, Florida.
The Partnership consists of a General Partner, Decade Companies-A General
Partnership, of which Jeffrey Keierleber and Decade 80, Inc. are the general
partners, and 1,936 Limited Partners at December 31, 1995.
BASIS OF ACCOUNTING
The Partnership's accounting records are maintained on the basis of accounting
utilized for federal income tax reporting purposes. The accompanying financial
statements have been prepared from such records adjusted for differences in
depreciation methods and related-party transactions. Certain accrual and tax
basis amounts are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------------------------
Accrual Tax Accrual Tax Accrual Tax
Basis Basis Basis Basis Basis Basis
------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total assets $26,474 $26,132 $27,914 $27,574 $36,094 $35,722
Partners' capital
(deficit):
General Partner (69) (60) (61) (52) (41) (28)
Limited Partners 3,110 6,360 4,449 7,617 6,623 9,659
Net loss:
General Partner (5) (4) (13) (12) (3) (1)
Limited Partners (465) (443) (1,301) (1,169) (324) (136)
</TABLE>
6
<PAGE> 40
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements. Estimates also affect the reported amounts of revenue and
expenses during the reporting period. Although estimates are considered to be
fairly stated at the time that the estimates are made, actual results could
differ from those estimates.
CASH EQUIVALENTS
The Partnership considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Such investments
are carried at cost which approximates market value.
DEPRECIATION
Depreciation is computed by the straight-line method using estimated useful
lives of 30 years for the buildings and improvements and 5 years for related
equipment.
For federal income tax purposes, the Partnership has adopted various
accelerated methods which provide for depreciation of buildings and
improvements over 27.5 years and related equipment over 7 years.
FEES TO AFFILIATES
Fees related to the offering, organizational and acquisition stages of the
Partnership paid to the General Partner or affiliates, and deferred interest
related thereto, are limited to a maximum amount as defined in the Partnership
prospectus. The Partnership reached this maximum in 1993. Accordingly, interest
was not charged on certain deferred fees (see Note 6) and the acquisition fee
on Pelican Sound was limited (see Note 3).
Acquisition fees, mortgage placement and mortgage brokerage fees, property
management fees and real estate sales commissions are payable to the General
Partner or affiliates of the General Partner. These fees are charged to expense
as follows:
7
<PAGE> 41
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Acquisition Fees
Acquisition fees designated for selection, negotiation and purchase of
Partnership properties have been capitalized as investment property and
allocated to land, buildings and improvements and equipment based on appraised
values. The portions allocated to buildings, improvements and equipment are
being depreciated over the respective lives of the buildings, improvements and
equipment.
Mortgage Placement and Mortgage Brokerage Fees
Fees for services rendered in locating potential borrowers and investigating
their creditworthiness for placement of mortgage loans are payable by the
Partnership to the extent not paid by the mortgagor. Any fees paid by the
Partnership will be charged to expense over the terms of the mortgage loans.
Property Management Fees
Fees for property management and rental services are being charged to expenses
over the period property management services are being performed.
Real Estate Sales Commissions
Fees may be earned for services rendered related to the sale of Partnership
property, as defined in the Partnership prospectus. Payment of such fees to an
affiliate of the General Partner shall be subordinated to a return to the
Limited Partners equal to their original capital contribution plus a 6% per
annum cumulative return.
EXPENSES OF OFFERING
Sales commissions, underwriting fees and reimbursed syndication costs paid to
the General Partner or affiliates of the General Partner in connection with the
capital offering have been recorded as a charge to Limited Partners' capital.
8
<PAGE> 42
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REIMBURSED EXPENSES
The Partnership reimburses the General Partner and affiliates of the General
Partner for the actual cost of goods and materials used by or for the
Partnership in the course of performing the general functions of the
Partnership. These general functions include accounting, investor
communications, investor documentation, legal services, tax services, computer
services, risk management, and any other related operational and administrative
expenses necessary for the prudent organization and operation of the
Partnership.
Reimbursed expenses paid by the General Partner or affiliates of the General
Partner on behalf of the Partnership were as follows: Decade Companies
($89,962--1995; $84,471--1994; $68,678--1993) and Decade Properties, Inc.
($929,883--1995; $878,934--1994; $772,494--1993). At December 31, 1995, the
following amounts were unpaid by the Partnership: Decade Companies ($2,949) and
Decade Properties, Inc. ($50,270).
ALLOCATIONS AND DISTRIBUTIONS
Pursuant to the Agreement, net income and losses from operations (exclusive of
those from the sale or disposition of Partnership properties) are to be
allocated 99% to the Limited Partners and 1% to the General Partner. In
computing net income and losses from operations, depreciation expense is
allocated differently to taxable and nontaxable entities.
Any gains from the sale or disposition of Partnership properties will be
allocated: 1) 99% to the Limited Partners and 1% to the General Partner until
the cumulative gains are equal to any losses from the sale or disposition of
Partnership property for all prior periods; 2) to the Limited Partners until
their cumulative gains equal the sum of all sales commissions, underwriting
fees, and reimbursed syndication costs for the current year and all prior
years, any losses from the sale or disposition of Partnership property for the
current year and all prior years, and an amount equal to 6% per annum,
cumulative and noncompounded, on the Limited Partners' capital investment minus
prior distributions of cash available for distribution or to the extent that
prior distributions of sales proceeds exceed the Limited Partners' original
capital investment ("priority return") from the
9
<PAGE> 43
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
inception of the Partnership to the end of the current year; 3) to the General
Partner an amount equal to the distributions made to the General Partner under
(iii)(b) below; 4) to the General Partner an amount equal to the distributions
made to the General Partner pursuant to (iv) below; 5) to the Limited Partners
until cumulative gains allocated to them are equal to (v) below; 6) to the
Limited Partners until cumulative gains allocated to them are equal to (vi)
below; and 7) to the General Partner until cumulative gains allocated to the
General Partner are equal to (vii) below. Any losses from the sale or
disposition of Partnership properties will be allocated 99% to the Limited
Partners and 1% to the General Partner.
Cash available for distribution, as defined in the Agreement, will be
distributed 99% to the Limited Partners and 1% to the General Partner.
Proceeds from the sale or disposition of Partnership properties, if any,
remaining after repayment of any General Partner's loan and payment of deferred
fees, will be distributed as follows: (i) to the Limited Partners, an amount
equal to 100% of their original capital contribution minus any prior
distributions of sales proceeds; (ii) to the Limited Partners, an amount to
provide their priority return; (iii) to the General Partner an amount equal to
the greater of the excess of (a) its capital contribution over the sum of all
prior distributions of sales proceeds or (b) 1% of such sales proceeds; (iv) in
the case of the sale of any property in which brokerage services are actually
performed by the General Partner or an affiliate, to the General Partner or an
affiliate, an amount equal to its subordinated real estate commission
(generally up to 3% of the aggregated selling price of all properties); (v) of
the remaining proceeds, 88% to the Limited Partners; (vi) then, to the Limited
Partners, the deficiency, if any, in return of capital plus a cumulative
preference of 10% per annum on their capital investment; and (vii) to the
General Partner, the remaining balance (not to exceed 12% of the proceeds
remaining after the distributions in accordance with (i) through (iv) above).
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per Limited Partnership interest is based on 99% of net loss as
allocated to the Limited Partners divided by the weighted average number of
interests outstanding during the year.
10
<PAGE> 44
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PENDING ACCOUNTING CHANGE
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
addresses situations where information indicates that a company might be unable
to recover, through future operations or sale, the carrying amount of
long-lived assets. SFAS No. 121 requires that long-lived assets that are used
in operations be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets might not be
recoverable. SFAS No. 121 is effective for the Partnership in 1996. The impact
to the Partnership's financial statements is not expected to be material.
3. LIKE-KIND EXCHANGE OF INVESTMENT PROPERTY
During 1993 the Partnership traded the Woodbridge Apartments for the Pelican
Sound Apartments pursuant to a like-kind exchange under Section 1031 of the
Internal Revenue Code. The exchange commenced on August 2, 1993, and was
completed as of November 30, 1993. The Woodbridge Apartments were sold on
August 2, 1993, to an unaffiliated buyer for a net selling price of $5,400,000.
The sale proceeds of $5,326,313 (net of prorations of $73,687) were transferred
to a Like-Kind Exchange Escrow Trust specifically reserved for the completion
of the like-kind exchange and were not available for distribution. The proceeds
in the Like-Kind Exchange Escrow Trust were used as follows: payoff of mortgage
note payable and accrued interest on Woodbridge Apartments of $2,516,666,
closing costs of $110,075 and purchase of Pelican Sound Apartments of
$2,699,572. The Partnership acquired Pelican Sound Apartments for $12,550,000
as of November 30, 1993, within the time period permitted by Section 1031 of
the Internal Revenue Code. The Partnership assumed a $10,000,000 mortgage note
payable on the investment property (see Note 4). The General Partner earned an
acquisition fee from the Partnership of $168,197 for the purchase of Pelican
Sound Apartments. An affiliate of the General Partner earned a sales commission
of $162,000 on the sale of Woodbridge Apartments. Both fees are unpaid as of
December 31, 1995. Because the transaction is considered an exchange for
financial reporting purposes, the cost basis of the Pelican Sound Apartments
equals the historical cost basis of the Woodbridge Apartments exchanged plus
the additional cash paid, net liabilities assumed and fees earned by the
General Partner and its affiliate, and no gain or loss was recognized as a
result of this transaction.
11
<PAGE> 45
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
4. INVESTMENT PROPERTIES
Investment properties owned at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Costs Capitalized
Initial Cost to Partnership Subsequent to Acquisition
-------------------------------------------------------------
Buildings Buildings
and and
Description Encumbrances Land Improvements Equipment Improvements Equipment
- ----------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Meadows II Apartments
Madison, Wisconsin $ 6,729 $1,144 $ 9,227 $ 442 $ 7 $262
Town Place Apartments
Clearwater, Florida 2,500 1,518 5,270 252 - 348
Pelican Sound Apartments
St. Petersburg, Florida 10,000 2,644 8,801 861 4 148
------- ------ ------- ------ --- ----
$19,229 $5,306 $23,298 $1,555 $11 $758
======= ====== ======= ====== === ====
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried
----------------------------------------------------
Buildings and Accumulated
Description Land Improvements Equipment Total Depreciation
- -------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Meadows II Apartments
Madison, Wisconsin $1,144 $ 9,234 $ 704 $11,082 $2,730
Town Place Apartments
Clearwater, Florida 1,518 5,270 600 7,388 1,544
Pelican Sound Apartments
St. Petersburg, Florida 2,644 8,805 1,009 12,458 1,119
------ ------- ------ ------- ------
$5,306 $23,309 $2,313 $30,928 $5,393
====== ======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Description Date of Construction Date Acquired
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Meadows II Apartments, Madison, Wisconsin In phases through 1980 January 1989
Town Place Apartments, Clearwater, Florida 1985 February 1990
Pelican Sound Apartments, St. Petersburg, Florida 1987 November 1993
</TABLE>
12
<PAGE> 46
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
4. INVESTMENT PROPERTIES (CONTINUED)
In April 1994, the Partnership disposed of Ashley Pointe Apartments to an
unaffiliated buyer for $3,070,000. The net proceeds of $2,990,181 were
transferred to a Like-Kind Exchange Escrow Trust (Trust) as it was the
Partnership's intent to complete a like-kind exchange pursuant to Section 1031
of the Internal Revenue Code. The proceeds in the Trust were used to pay off
the mortgage note payable on Ashley Pointe Apartments and closing costs.
Proceeds of $1,094,531 were kept on deposit in the Trust to acquire a
replacement property and complete the like-kind exchange. The Partnership did
not identify a replacement property in the time permitted under Section 1031
and, as such, a loss of $970,958 was reported for federal income tax purposes
and a loss of $979,610 occurred, for financial reporting purposes. Due to
contractual arrangement, the $1,094,531 deposit (along with interest earned of
$23,000) remained in the Trust as of December 31, 1994, reported as exchange
escrow. As of December 31, 1995, $497,390 remains on deposit in the Trust to be
used to acquire a replacement property or to provide additional liquidity for
the Partnership, if necessary. Funds were withdrawn from the Trust in 1995 to
fund the Partnership's financing needs. An affiliate of the General Partner
earned a sales commission of $92,100 on the 1994 disposition of Ashley Pointe
Apartments resulting in a total loss of $1,071,710 for financial reporting
purposes. This fee is unpaid as of December 31, 1995, and is subordinated as
set forth in Note 2.
In 1989, the General Partner earned an acquisition fee from the Partnership of
$753,688 related to the purchase of the Meadows II Apartments which was
capitalized as part of the initial cost of the investment property. The
acquisition fee has not been paid as of December 31, 1995.
In 1992, the General Partner earned an acquisition fee from the Partnership of
$264,000 related to the purchase of Woodbridge Apartments, which was
capitalized as part of the initial cost of the investment property. Woodbridge
Apartments was disposed of in August 1993 (see Note 3). The acquisition fee has
not been paid as of December 31, 1995.
13
<PAGE> 47
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
4. INVESTMENT PROPERTIES (CONTINUED)
A reconciliation of the cost and accumulated depreciation of the investment
properties at December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
Cost:
Balance at beginning of year $30,750 $35,387 $27,612
Acquisition of investment properties - - 12,306
Additions to investment properties 178 160 205
Disposal of investment property - (4,797) (4,736)
-----------------------------------------
Balance at end of year $30,928 $30,750 $35,387
=========================================
Accumulated depreciation:
Balance at beginning of year $ 4,282 $ 3,867 $ 2,923
Provision for the year 1,111 1,242 1,110
Disposal of investment property - (827) (166)
-----------------------------------------
Balance at end of year $ 5,393 $ 4,282 $ 3,867
=========================================
</TABLE>
The aggregate cost of the investment properties for federal income tax purposes
is $28,045,529 because the acquisition fees and sales commission payable to the
General Partner are capitalizable for financial reporting purposes only. The
accumulated depreciation for federal income tax purposes was $5,142,113,
$4,030,227 and $3,645,760 at December 31, 1995, 1994 and 1993, respectively.
14
<PAGE> 48
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
5. MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
---------------------------
<S> <C> <C>
Mortgage note payable in monthly installments of $21,952, including
interest at 7.5%, with final payment due December 1, 2021. $ 3,009,554 $ 3,045,772
Mortgage note payable with interest accruing at 2.48% over the
monthly weighted average cost of funds of the bank, adjusted
monthly, with maximum and minimum rates of 14.75% and 6.75%,
respectively (7.591% at December 31, 1995). Monthly payments
of principal and interest are computed annually ($27,890
commencing January 1, 1996). The final payment is due
December 10, 2004. 3,718,979 3,755,021
Mortgage note payable with monthly interest installments at 1.0%
over the prime rate (9.25% at December 31, 1995). The entire
principal balance is due April 1, 1996. 2,500,000 2,500,000
Mortgage note payable with monthly interest installments at 7.0%
for two years. Monthly installments of $67,184, including
interest at 7.0%, thereafter, with final payment due December 1,
1998, unless the term is extended for an additional five years as
described in the mortgage note agreement. 10,000,000 10,000,000
----------------------------
$19,228,533 $19,300,793
============================
</TABLE>
The 7.5% mortgage note is insured under the National Housing Act and, as a
result, the operation of the rental property is subject to the terms of the
Regulatory Agreement between the Partnership and the Department of Housing and
Urban Development (HUD). The mortgage is secured by the Meadows II property.
Under the terms of the Regulatory Agreements, certain actions, including the
payment of any distributions to the Partners from surplus cash generated by the
Project, require the approval of The Federal Housing Administration as an agent
for HUD.
15
<PAGE> 49
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
5. MORTGAGE NOTES PAYABLE (CONTINUED)
The Meadows II, Town Place and Pelican Sound Apartments investment properties
and all associated operating revenues are pledged as collateral for the
mortgage notes payable. Interest paid with respect to the mortgage notes and
other indebtedness was $1,454,778, $1,735,055 and $1,099,588 in 1995, 1994 and
1993, respectively. Aggregate annual maturities of the mortgage notes payable
for the five years subsequent to December 31, 1995, are as follows:
$2,703,000--1996; $218,000--1997; $9,881,000--1998; $117,000--1999 and
$126,000--2000.
The Partnership had a $250,000 line of credit from a bank with interest charged
on outstanding draws at 6%, expiring January 1995. At December 31, 1994, there
was $100,000 outstanding on the line of credit. In January 1995, the line of
credit was extended to January 1996 at an interest rate of 8.5%. No amounts are
outstanding at December 31, 1995.
6. INCOME TAXES
The Partnership has received an opinion from legal counsel that it will be
classified as a partnership for federal income tax purposes. Therefore,
Partnership losses or income and taxes attributable thereto will be the
responsibility of the various Partners and no provision for income taxes has
been made in the Partnership's financial statements.
Differences between the net loss as reported herein and net loss reported for
federal income tax purposes arise from timing differences related to
depreciation, disposition of investment property and accrual-basis adjustments.
The following is a reconciliation of reported net loss and net loss reported
for federal income tax purposes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------
<S> <C> <C> <C>
Net loss as reported for financial reporting purposes $(469,698) $(1,314,409) $(327,203)
Add:
Depreciation (917) 22,782 153,057
Loss on disposition of investment property - 100,752 -
Accrual basis adjustments 23,321 9,250 36,631
-----------------------------------------
Net loss reported for federal income tax purposes $(447,294) $(1,181,625) $(137,515)
=========================================
</TABLE>
16
<PAGE> 50
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
7. TRANSACTIONS WITH RELATED PARTIES
Decade Companies and its general partners are general partners for
other limited partnerships which have invested in real estate. The
Partnership also shares certain management and accounting employees and
other expenses with entities that are controlled by Decade Companies and its
general partner. The Partnership has executed certain contracts providing
for the following fees payable to the General Partner or to affiliates of
the General Partner:
Decade Companies
Decade Companies earned the following amount from the Partnership:
acquisition fees ($168,197--1993). Interest on acquisition fees was not
earned by Decade Companies in 1995, 1994 or 1993 due to the fee limitation
imposed by the Partnership prospectus (see Note 2). Acquisition fees of
$2,146,635 are payable to Decade Companies at December 31, 1995. Such fees
were capitalized as part of the cost of the investment properties.
In addition, the following other items are payable to Decade Companies
at December 31, 1995: accrued interest on acquisition fees ($572,467) and
mortgage placement fees ($90,246).
Decade Properties
Decade Properties earned the following amounts from the Partnership:
property management fees ($449,205--1995; $489,960--1994; $399,221--1993),
real estate sales commissions ($92,100--1994; $162,000--1993) and interest
on sales commissions ($28,588--1995; $26,570--1994; $18,259--1993). Real
estate sales commissions of $440,700 are payable to Decade Properties at
December 31, 1995. Such fees were capitalized into the cost of the
investment properties, except for the fee earned on the disposition of
Ashley Pointe Apartments of $92,100 (see Note 4).
In addition, accrued interest on sales commissions ($115,821) is
payable to Decade Properties at December 31, 1995.
17
<PAGE> 51
Decade Companies Income Properties--
A Limited Partnership
Notes to Financial Statements (continued)
7. TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Deferred fees payable to affiliates bear interest at the minimum rate required
under the Internal Revenue Code (the Code) to avoid imputed interest under the
Code and is payable only from sales proceeds, Partnership operations or cash
reserves. However, as described above and in Note 2, interest has not been
earned on certain deferred fees for 1995, 1994 and 1993.
Charges by affiliated parties in 1996 are estimated by management to
approximate $455,000 for property management fees. Interest charges by
affiliated parties in 1996 are expected to approximate 1995 amounts.
18
<PAGE> 52
Other Financial Information
<PAGE> 53
Report of Independent Auditors on Other Financial Information
The Partners
Decade Companies Income Properties-A Limited Partnership
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The other financial information
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in our audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Ernst & Young LLP
January 26, 1996
19
<PAGE> 54
Decade Companies Income Properties--
A Limited Partnership
Details of Income (Loss) From Investment Property Operations
Year ended December 31, 1995
<TABLE>
<CAPTION>
MEADOWS II TOWN PLACE PELICAN SOUND
APARTMENTS APARTMENTS APARTMENTS TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue associated with investment properties:
Rentals $1,669,548 $1,482,684 $2,373,779 $5,526,011
Other 44,971 47,973 61,584 154,528
---------------------------------------------------------------
1,714,519 1,530,657 2,435,363 5,680,539
Operating expenses associated with investment properties:
Operating 700,655 622,688 1,013,259 2,336,602
Administrative 96,662 79,351 124,817 300,830
Depreciation 349,255 251,057 510,655 1,110,967
Interest, including amortization of debt issue costs 508,026 249,626 722,222 1,479,874
Real estate taxes 269,368 172,686 298,528 740,582
---------------------------------------------------------------
1,923,966 1,375,408 2,669,481 5,968,855
---------------------------------------------------------------
Income (loss) from investment property operations $ (209,447) $ 155,249 $ (234,118) $ (288,316)
===============================================================
</TABLE>
20
<PAGE> 55
Decade Companies Income Properties--
A Limited Partnership
Details of Income (Loss) From Investment Property Operations
Year ended December 31, 1994
<TABLE>
<CAPTION>
MEADOWS II ASHLEY POINTE TOWN PLACE PELICAN SOUND
APARTMENTS APARTMENTS APARTMENTS APARTMENTS TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenue associated with investment
properties:
Rentals $1,867,077 $303,457 $1,448,885 $2,322,191 $5,941,610
Other 49,243 18,964 40,403 49,676 158,286
-------------------------------------------------------------------------
1,916,320 322,421 1,489,288 2,371,867 6,099,896
Operating expenses associated with investment
properties:
Operating 677,323 198,132 586,266 932,667 2,394,388
Administrative 81,589 10,894 81,818 115,377 289,678
Depreciation 352,189 110,581 284,240 495,875 1,242,885
Interest, including amortization of debt issue costs 490,197 56,321 439,165 722,221 1,707,904
Real estate taxes 260,514 22,962 173,657 304,842 761,975
-------------------------------------------------------------------------
1,861,812 398,890 1,565,146 2,570,982 6,396,830
-------------------------------------------------------------------------
Income (loss) from investment property operations $ 54,508 $(76,469) $ (75,858) $ (199,115) $ (296,934)
=========================================================================
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 740,409
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 878,229
<PP&E> 30,927,237
<DEPRECIATION> 5,393,539
<TOTAL-ASSETS> 26,458,367
<CURRENT-LIABILITIES> 4,188,554
<BONDS> 19,228,533
0
0
<COMMON> 0
<OTHER-SE> 3,041,280
<TOTAL-LIABILITY-AND-EQUITY> 26,458,367
<SALES> 5,680,539
<TOTAL-REVENUES> 5,723,608
<CGS> 0
<TOTAL-COSTS> 4,488,981
<OTHER-EXPENSES> 190,901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,513,424
<INCOME-PRETAX> (469,698)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (469,698)
<EPS-PRIMARY> (26.62)
<EPS-DILUTED> (26.62)
</TABLE>
