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, 1996
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.: 0-21455
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:
Limited
Partnership Interests
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 (Sec. 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
or
organized market for the Interests.
The number of Interests outstanding of the registrant as of
February 28, 1997: 13,400.27.
<PAGE>
<PAGE>
Annual Report on Form 10-K
Index
YEAR ENDED DECEMBER 31, 1996
Decade Companies Income Properties - A Limited Partnership
Brookfield, Wisconsin
Part I Item Page
Description of Business 1 3
Properties 2 5
Legal Proceedings 3 9
Submission of Matters to a Vote of Security Holders 4 10
Part II
Market for Registrant's Limited Partnership
Interests and Related Partner Matters 5 10
Selected Financial Data 6 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 13
Financial Statements and Supplementary Data 8 25
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 9 26
Part III
Directors and Executive Officers of the Registrant 10 26
Executive Compensation 11 27
Security Ownership of Certain Beneficial Owners and
Management 12 28
Certain Relationships and Related Transactions 13 28
Part IV
Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 14 29
Signatures 33
Financial Statements 34
<PAGE>
<PAGE>
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 1996, 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 exchanged
Woodbridge Apartments, and completed the exchange in November
1993, for Pelican Sound Apartments, a 379-unit apartment complex
located in St. Petersburg, Florida. In April 1994 Ashley Pointe
Apartments was sold.
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.
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, but not limited to,
apartment complexes owned by affiliates of the General Partner.
Many of these competitors may have greater resources 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 1996, the Partnership did not directly employ any
individuals. In order to effectively manage the personnel
function of operating the Apartments and the Partnership and to control
the costs of compensation (including wages, worker's compensation,
unemployment, payroll taxes, health care, and 401(k) profit
sharing plans), the employees who work for the Partnership and the
Apartments are employed by the General Partner or its affiliate,
Decade Properties, Inc. The costs of these employee services are
reimbursed by the Partnership based upon the records of such
employees in performing such services multiplied by a rate
established to cover overhead and expenses incurred to perform
such duties. The Apartments are managed by Decade Properties, Inc.,
an affiliate of the General Partner. Employees of the General
Partner and affiliates perform the on-site management services required
to operate and maintain the Apartments and render partnership
management services to the Partnership including maintaining
investor communications, compliance with tax laws and other
governmental regulations, 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.
1996 1995 1994
(amounts in thousands)
Sales to unaffiliated customers:
United States total $ 6,083 $ 5,680 $ 6,100
St. Petersburg, Florida $ 2,533 $ 2,435 $ 2,372
Madison, Wisconsin $ 1,954 $ 1,715 $ 1,916
Clearwater, Florida $ 1,596 $ 1,530 $ 1,489
Orlando, Florida $ -0- $ -0- $ 323
Profit or (loss) from investment property operations (after
depreciation):
United States total $ (190) $ (288) $ (297)
St. Petersburg, Florida $ (225) $ (234) $ (199)
Madison, Wisconsin $ 14 $ (209) $ 54
Clearwater, Florida $ 21 $ 155 $ (76)
Orlando, Florida $ -0- $ -0- $ (76)
Identifiable properties:
United States total $24,616 $25,534 $26,467
St. Petersburg, Florida $10,886 $11,339 $11,764
Madison, Wisconsin $ 8,059 $ 8,352 $ 8,648
Clearwater, Florida $ 5,671 $ 5,843 $ 6,055
Orlando, Florida $ -0- $ -0- $ -0-
At the close of business on December 31, 1996, the Partnership's
13,400.27 Interests were held by 1,426 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. Properties
The residential apartment complexes which are owned and operated
by the Partnership as of December 31, 1996 are:
Rental
Name Location Units
Pelican Sound St. Petersburg, Florida 379
The Meadows II Madison, Wisconsin 316
Town Place Clearwater, Florida 240
935
In the opinion of the General Partner, the properties are
adequately insured.
The Meadows II was acquired by the Partnership in January 1989.
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 $6.6 million. Town Place is pledged
as collateral against a mortgage encumbrance of $6.7 million.
Pelican Sound is pledged as collateral against a mortgage
encumbrance of $9.9 million.
The average monthly gross potential rent ("GPR") per unit at the
Apartments for the month of December of each year and the related
occupancy rate ("OR") for December of each year is set forth
below:
Number December December December
of Units 1996 1995 1994
GPR OR GPR OR GPR OR
Pelican Sound 379 $576 96% $564 92% $549 97%
The Meadows II 316 $569 91% $560 92% $566 85%
Town Place 240 $585 95% $569 92% $551 90%
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:
Number
of Square Asking Rent
Style Units Feet 12/96 12/95 12/94
One-bedroom/one bath 128 505 $495-510 $480-495 $475-490
One bedroom/one bath 156 700 $575-595 $565-590 $535-565
One-bedroom/one bath/den 27 830 $660-685 $625-650 $615-645
Two-bedroom/two bath 68 910 $715-740 $695-715 $680-710
379
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:
Number
of Square Asking Rent
Style Units Feet 12/96 12/95 12/94
One-bedroom 88 625 $510-520 $480-495 $505-515
One-bedroom/deluxe 12 744 $510-525 $490-505 $520-535
Two-bedroom/one bath 192 875 $585-600 $550-580 $585-605
Two-bedroom/1.5 bath/den 12 1,466 $800-850 $750-850 $795-825
Three-bedroom 12 1,466 $800-850 $750-850 $805-835
316
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:
Number
of Square Asking Rent
Style Units Feet 12/96 12/95 12/94
One-bedroom/Suite 36 540 $480 $470 $455
One bedroom/Garden 72 720 $530-570 $515-540 $485-535
Two-bedroom/one bath 36 836 $635-650 $620-635 $580-600
Two-bedroom/two bath 96 1,036 $665-700 $655-725 $630-685
240
Item 3. Legal Proceedings
On December 2, 1996 the Partnership commenced a civil action in
U.S. District Court for the Eastern District of Wisconsin against
Arnold K. Leas, Wellington Management Corporation, and WMC Realty,
Inc. ("Defendants") alleging violations of the securities laws and
the Defendants counterclaimed against the Partnership and the
General Partner. Subsequently, an Offer and Settlement Agreement
was executed effective March 13, 1997, between the parties.
Pursuant to the settlement agreement, Jeffrey Keierleber, an
individual who is a general partner in Decade Companies (the
General Partner of the Partnership) has agreed to purchase certain
Limited Partnership Interests for a net price to the Limited
Partner of $550 per Limited Partner Interest until May 5, 1997,
(plus commissions ranging from $42.50 to $55.00 per Interest paid
to an affiliate of the Defendants), provided that the Limited
Partnership Interests are acquired by isolated transactions that do
not give rise to general solicitation or a tender offer. Pursuant
to the settlement agreement, each party (and their affiliates)
agreed that for a period of ten years from March 13, 1997, neither
they nor any affiliate will: (a) acquire, offer to acquire or agree
to acquire, directly or indirectly, by purchase or otherwise, any
voting securities (including partnership interests) or direct or
indirect rights or options to acquire any securities of any Decade
or Wellington sponsored partnership or an affiliate of the parties,
as the case may be; (b) make, or in any way participate, directly
or indirectly, in any "solicitation" of "proxies" to vote (as such
terms are used in the proxy rules of the Securities and Exchange
Commission) or seek to advise or influence any person or entity
with respect to the voting of any voting securities of any Decade
or Wellington sponsored partnership or an affiliate; (c) form, join
or in any way participate in a "group" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, with respect to any voting securities of any Decade or
Wellington sponsored partnership or an affiliates; or (d) otherwise
act, alone or in concert with others, to seek to control or
influence the management, the general partner or policies of any
Decade or Wellington sponsored partnership or an affiliate.
On March 20, 1997, the Eastern District of Wisconsin federal court
dismissed, pursuant to the stipulation of the parties, Decade
Companies Income Properties--A Limited Partnership and Decade
Companies lawsuit against Arnold Leas, Wellington Management
Corporation, and WMC Realty Inc. (and the Defendants counterclaims
against DCIP and Decade Companies) pending in the Eastern District
of Wisconsin.
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. However, two matters were submitted to a vote
of the security holders in January 1997.
On January 4, 1997 a proxy statement and consent was mailed by the
General Partner to all Limited Partners in connection with a
proposed amendment to the Limited Partnership Agreement to adopt a
new Section 8.6 encaptioned the "Fair Price Provision". The proxy
period expired on February 4, 1997. The Fair Price Provision was
adopted by a majority of 7,255 Interests (approximately 54% of the
outstanding Interests).
A proxy statement dated January 27, 1997 and consent was mailed by
Arnold K. Leas (a limited partner of the Partnership) to all
Limited Partners in connection with a proposal to remove Decade
Companies as the general partner of the Partnership and
concurrently therewith appoint Wellington Management Corporation
(his affiliate) as the new general partner. The proxy period
expired on March 1, 1997. To the best of the General Partner's
knowledge, approximately 84% of the limited partners did not vote
for the Leas proposal. As a result, the proposal was not
adopted.
PART II
Item 5. Market for Registrant's Limited Partnership Interests
and Related Partner Matters
a) Market Information
There has not been an organized public trading market and it is not
anticipated that a public market for Limited Partnership Interests
in the Partnership will develop. Although there is no established
public trading market, in November 1996 the Partnership through a
tender offer purchased 4,066.036 Limited Partner Interests at a
price of $402 per Interest.
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, 1997, there were 1,426 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 (except for the third quarter of 1996 which was
suspended). Cash distributions declared to the Limited Partners
for the two year period ended December 31, 1996 were made as
follows:
Period Date Amount Distributed
Ended Paid Total Per $1,000 Interest
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
03/31/96 04/26/96 $218,330 $12.50
06/30/96 07/26/96 $218,330 $12.50
09/30/96 N/A $ -0- $ -0-
12/31/96 01/22/97 $167,503 $12.50
The cash distribution for the third quarter of 1996 was suspended
in October during the tender offer to set aside cash reserves that
may have been required to repurchase Limited Partner Interests.
This step was necessary in order to reduce the amount of borrowing
that might have been required to repurchase Interests if more than
8,944 Interests were tendered. Once the tender offer was completed
in November, the General Partner determined that cash distributions
could be resumed beginning with the fourth quarter of 1996.
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 actual amount and frequency of future cash distributions will
depend upon future cash flows generated by operations, capital
requirements, debt service requirements, financial condition, and
working capital requirements. With fewer outstanding Interests
after the completion of the tender offer it is possible that the
amount of the quarterly cash distribution will increase. However,
the cash depleted by the litigation described in Item 3 herein has
reduced cash reserves and therefore the Partnership expects that
comparable cash distributions of $12.50 per Interest per quarter
will continue to be paid in 1997.
Item 6. Selected Financial Data
Selected Statement of Operations Data:
Year Ended December 31
1996 1995 1994 1993
1992
(in thousands of dollars, except per Interest data)
Revenues associated with
rental properties $ 6,083 $ 5,681 $ 6,100 $ 5,190 $ 4,875
Income (Loss) from operations
of rental properties $ (190) $ (288) $ (297) $ (229) $ 18
Net (Loss) $ (289) $ (470) $(1,314) $ (327) $ (326)
Per Limited Partner Interest:
Cash distributions
declared $ 38 $ 50 $ 50 $ 50 $ 45
Net (Loss) $ (17) $ (27) $ (74) $ (19) $ (18)
Selected Balance Sheet Data:
December 31
(in thousands of dollars)
1996 1995 1994 1993 1992
Total Assets $27,781 $26,458 $27,914 $36,093 $25,515
Long-Term Debt $23,185 $19,229 $19,301 $25,330 $14,016
Partners' Capital $ 397 $ 3,041 $ 4,388 $ 6,582 $ 7,789
Number of properties 3 3 3 4 4
Number of rental units 935 935 935 1,135 924
Certain matters that materially affect the comparability of the
information include: 1) the June 1992 purchase of the Woodbridge
Apartments, a 168 unit apartment complex located in Winter Park,
Florida; (2) the exchange of Woodbridge Apartments for Pelican
Sound Apartments which commenced in August 1993 and was completed
as of November 1993; (3) the disposition of Ashley Pointe
Apartments in April 1994; 4) the $6.7 million refinancing of the
$2.5 million mortgage loan on Town Place Apartments in May 1996; 5)
the suspension of cash distributions for the third quarter of 1996;
6) the purchase of 4,066.036 Limited Partner Interests in November
1996; and 7) the costs of litigation incurred in December 1996 (See
Item 3). The fluctuation in total assets reflects not only the
real estate transactions, but also the annual depreciation for
financial statement purposes. Total assets do not reflect any
increase for the difference between the estimated fair market value
of the assets and the book value of the assets for financial
statements purposes. Therefore, the amounts shown as Partners'
Capital do not purport to be the estimated fair market value or
liquidation value of the Limited Partnership Interests.
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, 1996, 1995 and
1994 and present the balance sheets as of December 31, 1996 and
1995.
During 1996, cash and cash equivalents increased by $2,564,000 from
$56,000 at December 31, 1995 to $2,620,000 at December 31, 1996.
During 1996, approximately $901,000 was generated by operating
activities, a net amount of $321,000 was provided by investing
activities, and approximately $1,342,000 was provided by financing
activities as shown herein on the Statements of Cash Flows.
During 1996, the Exchange Escrow from the Ashley Pointe transaction
was reduced by $497,000 to provide funds for investing and
financing activities as set forth herein on the Statements of
Cash Flows.
Liabilities increased by approximately $4.0 million from $23.4
million at December 31, 1995 to $27.4 million at December 31, 1996.
The increase in liabilities is primarily attributable to the net
increase in mortgage notes of $3,956,000. Payables to affiliates
increased $61,000 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 decreased $51,000 from 1995 to 1996 due to fewer
outstanding Limited Partner Interests as a result of the repurchase
of Interests in November. Other changes in liabilities include
increases in security deposits of $5,000 and accounts payable of
$30,000, and a decrease in accrued real estate taxes of $34,000.
The outstanding balance of the mortgage loan on Pelican Sound
Apartments averaged $9.97 million during the three year period
presented. The outstanding balance of the mortgage loans on the
Meadows II Apartments averaged $6.77 million during the three year
period presented. The outstanding balance of the mortgage loans on
Town Place Apartments averaged $4.54 million during the three year
period presented. A $4.0 million loan on Town Place Apartments
was paid off in December 1994 with a $2.5 million loan continuing
until the mortgage was refinanced in May 1996 on $6.7 million. 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.
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 74.5% of the capitalized cost, compared
to 62.2% at the end of 1995 and 62.8% at the end of 1994.
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 1996 was approximately $6 per $1,000 Limited Partner Interest.
Partners' Capital decreased by $2,638,000 during 1996. The
decrease was attributable to the repurchase of limited partner
interests of $1,635,000, the tender offer costs incurred of
$114,000, the net loss of $289,000 for financial reporting purposes
(after depreciation and amortization of $1,117,000) and $607,000 of
distributions declared to the Partners.
Results of Operations
The Statements of Operations present a three-year comparison of
operations divided into two separate categories: investment
property operations and other partnership income (expenses).
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 379-unit apartment complex
known as Pelican Sound Apartments located in St. Petersburg,
Florida, a 316-unit apartment complex known as The Meadows II
(Phases II, III, and IV) located in Madison, Wisconsin, and a
240-unit apartment complex known as Town Place Apartments located
in Clearwater, Florida. A 200-unit apartment complex located in
Orlando, Florida known as Ashley Pointe Apartments was operated for
four months in 1994.
The comparative presentation of other income reflects the yield
on
portfolios that were not of equal size. During 1994 the proceeds
from a $4 million mortgage loan against Town Place Apartments was
invested in short-term bank certificates of deposit, which were
redeemed to pay off the $4 million loan on December 1, 1994. In
May 1996 the net proceeds of approximately $4.2 million from the
Town Place refinancing were invested in short-term instruments
until approximately $1.6 million was used at the end of November
1996 to repurchase limited partners Interests.
Revenues from 1996 rental operations increased $402,000 from the
prior year, compared to a decrease of $419,000 in 1995. The
increase in 1996 was comprised of increases at The Meadows II
($239,000), Pelican Sound ($98,000) and Town Place ($65,000). A
summary of total operating revenue by apartment site follows:
1996 1995 1994
Pelican Sound $2,533,000 $2,435,000 $2,372,000
The Meadows II 1,954,000 1,715,000 1,916,000
Town Place 1,596,000 1,531,000 1,489,000
Ashley Pointe -0- -0- 323,000
Total $6,083,000 $5,681,000 $6,100,000
The $239,000 increase in 1996 at The Meadows II is attributable a
10% increase in average occupancy (from 80% to 90%) which was
driven by a decrease in asking rents. This compares to a $201,000
decrease in 1995 which was attributed to a 10% decline in average
occupancy (from 90% to 80%) which was attributed to increased
competition in the area. The $98,000 increase in 1996 at Pelican
Sound is attributed to a 2.3% increase in asking rents and a 1%
increase in average occupancy (from 93% to 94%). This compares to
a $63,000 increase in 1995 which was attributed to a 3.7% increase
in asking rents, offset by a 1% decline in average occupancy (from
94% to 93%). The $65,000 increase in 1996 at Town Place is
attributable to a 2.3% increase in asking rents, offset by a 3%
decrease in average occupancy (from 93% to 90%). This compares to
a $42,000 increase in 1995 which was attributable to a 2.4%
increase in asking rents.
Rental expenses for 1996 before depreciation and debt service
increased $142,000, compared to a decrease of $68,000 in 1995. The
1996 increase was comprised of increases at Pelican Sound
($89,000), Town Place ($33,000) and The Meadows II ($18,000). A
summary of operating expenses before depreciation and debt service
by apartment site follows:
1996 1995 1994
Pelican Sound $1,525,000 $1,436,000 $1,353,000
The Meadows II 1,085,000 1,067,000 1,019,000
Town Place 910,000 875,000 842,000
Ashley Pointe -0- -0- 232,000
Total $3,520,000 $3,378,000 $3,446,000
The increase in operating revenue of $402,000, offset by the
increase in operating expenses of $142,000, resulted in a
$260,000
increase in net operating income from property operations before
depreciation and debt service for 1996 compared to an decrease in
1995 of $351,000 over the prior 1994 year. The 1996 increase was
comprised of increases at The Meadows II ($201,000), Town Place
($30,000) and Pelican Sound ($9,000). A summary of operating
income before depreciation and debt service by apartment site
follows:
1996 1995 1994
Pelican Sound $1,008,000 $ 999,000 $1,019,000
The Meadows II 869,000 648,000 894,000
Town Place 686,000 656,000 648,000
Ashley Pointe -0- -0- 90,000
Total $2,563,000 $2,303,000 $2,654,000
Interest expense increased $180,000 in 1996 compared to a
decrease
of $228,000 in 1995. The increase in 1996 was comprised of an
increase for Town Place of $202,000 (resulting from the increased
mortgage debt), offset by decreases for Pelican Sound ($15,000) and
The Meadows II ($7,000).
After considering the effect of interest expense, net operating
income before depreciation was $903,000 in 1996 compared to
$823,000 in 1995, and $946,000 in 1994. A summary of net operating
income before depreciation by apartment site follows:
1996 1995 1994
Pelican Sound $ 301,000 $ 277,000 $ 297,000
The Meadows II 367,000 140,000 407,000
Town Place 235,000 406,000 208,000
Ashley Pointe -0- -0- 34,000
Total $ 903,000 $ 823,000 $ 946,000
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 $132,000
from 1994 to 1995 and decreased $10,000 from 1995 to 1996.
As a result, net loss from investment properties operations for
1996 was $190,000, compared to a net loss of $288,000 in 1995, and
a net loss of $297,000 in 1994. For all three years all three
properties had positive cash flow. General Partner anticipates
that all three properties will positively cash flow in 1997.
Other expense, net of other income, decreased approximately $83,000
in 1996 from 1995 compared to a decrease of $836,000 in 1995 from
1994. The $83,000 decrease in 1996 is attributable to a $109,000
increase in interest income earned on the Town Place refinancing
proceeds, offset by a $31,000 increase in administrative expenses
which is attributed to the litigation described in Item 3 herein.
Interest accrued on payables to affiliates decreased $5,000.
The average monthly gross potential rent per unit at the Apartments
for the three year period was:
Number
of Units 1996 1995 1994
Pelican Sound 379 $570 $557 $537
The Meadows II 316 $563 $567 $559
Town Place 240 $574 $561 $548
Ashley Pointe 200 N/A N/A $485
"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 and are comparable with existing market conditions.
The average occupancy level at the Apartments for the three year
period was:
1996 1995 1994
All Apartments 93% 89% 92%
Pelican Sound 94% 93% 94%
The Meadows II 90% 80% 90%
Town Place 90% 93% 93%
Ashley Pointe N/A N/A 86%
The range of occupancy levels at the Apartments for the years
was:
1996 1995 1994
All Apartments 91.5-94.8% 83.4-91.9% 90.8-92.9%
Pelican Sound 91.5-99.0% 91.3-96.9% 91.1-96.6%
The Meadows II 85.0-92.4% 69.8-91.9% 85.1-94.4%
Town Place 86.5-95.0% 90.5-97.0% 88.8-97.9%
Ashley Pointe N/A N/A 80.7-87.8%
The differences in occupancy levels were primarily related to the
Partnership's asking rents compared to other competitors in the
market place.
There are certain events that could cause the reported financial
information to not be indicative of future operating results or
future financial condition, as follows:
In May 1996 the Partnership refinanced the $2.5 million mortgage
loan on Town Place Apartments with a new mortgage loan of $6.7
million. The debt service requirements of such loan are reflected
in the financial statements for eight months in 1996 and will
continue to have an impact on future operations.
During 1996 the General Partner determined to commit the net
proceeds from refinancing the Town Place mortgage to repurchase
Interests from the Limited Partners who desired to sell those
Interests, while offering other Limited Partners the option of
holding their Interests subject to the potential of future gain or
loss. Accordingly, in October 1996 the Partnership made an Offer
to purchase Limited Partner Interests at a price of $402 per
Interest. This course of action permitted 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 chose to tender their Interests, in effect, exchanged
the certainty and liquidity of a current sale for the potentially
higher return (or risk of loss) of continued ownership of their
Interests. The repurchase and retirement of 4,066.036 Interests
(approximately 23% of the outstanding Interests) was completed in
November 1996 using $1.6 million of cash reserves which will impact
future operations by reducing the portfolio available to generate
investment income.
The settlement in March 1997 of the litigation described in Item 3
herein will impact future operations by eliminating the litigation
expenses as included in the increase in administrative expenses for
1996.
Liquidity
At December 31, 1996 there was approximately $2.8 million of cash
and cash equivalents and escrow deposits versus total liabilities
of approximately $27.4 million. Approximately $276,000 of mortgage
liabilities can be classified as short-term debt, with the balance
of $22.9 million as long-term debt. Cash increased approximately
$2,564,000 during the year to $2.6 million at December 31, 1996.
Approximately $3.5 million of deferred fees and deferred interest
related thereto has been earned by the General Partner and
affiliates, of which approximately $2.6 million is payable from the
proceeds of mortgage financing or refinancing. Consequently, this
amount of deferred fees can be classified as a short term
obligation of the Partnership to be paid from the cash reserves
obtained in May 1996 from the refinancing of the Town Place
mortgage. Payment of the deferred fees was delayed during 1996 to
provide funds that might be needed for the repurchase of Limited
Partner Interests that took place in the fourth quarter of 1996.
Now that the tender offer to repurchase Limited Partner Interests
has been completed, the General Partner more likely than not will
be paid the entire amount of deferred fees during 1997 (which would
eliminate all unrestricted cash reserves of the Partnership). The
actual timing of the payment of deferred fees and related interest
will take into account the amount of cash reserves to be set aside
that the General Partner deems necessary or appropriate for the
operation and protection of the Partnership. Nonpayment of the
$2.6 million of deferred fees does not cause additional expense to
the Partnership because the amount of deferred fees and interest
related thereto is limited to a maximum amount as defined in the
Partnership Agreement. The Partnership reached the maximum amount
in 1993 with the purchase of Pelican Sound (whereby an acquisition
fee earned of $900,000 was reduced to $168,197) and accordingly
interest has not been charged since then. The General Partner is
reviewing the calculation of the amount of front end fees allowed
under the Limited Partner Agreement. While no determination has
been made, it appears that the fees that may be allowed under the
Limited Partnership Agreement may have been understated by up to
$300,000. The General Partner is analyzing the calculation. If
additional fees are allowed under the Limited Partnership
Agreement, the General Partner would accrue and pay such fees and
the Partnership would have additional capitalized basis in the
properties leading a greater depreciation deductions.
Investment property operations generated a profit of $927,000
(before depreciation and amortization of $1,117,000) compared to
$839,000 in 1995 and $962,000 in 1994.
Cash flow of $901,000 was generated by operating activities during
1996 as shown on the Statements of Cash Flows in the annual
financial statements. The 1996 cash flow was used to make cash
distributions to the partners of $658,000, of which $167,000 (25%)
was considered to be portfolio income subject to income taxes.
(Investment interest expense of $180,000 was available in 1996 to
offset all of the portfolio income for tax purposes).
Approximately $497,000 of cash from the Ashley Pointe Exchange
Escrow plus the additional proceeds from the mortgage debt on Town
Place, which was increased by $4.2 million to provide cash
reserves, was available to make principal reductions on mortgage
notes payable of $244,000, to make additions to investment
properties of $176,000, to pay debt issue costs of $208,000, to pay
tender offer costs of $114,000, and to repurchase 4,066.036 Limited
Partner Interests with $1.6 million of cash, and to provide liquidity.
On a short-term basis, rental operations are expected to provide a
stream of cash flow to fund cash distributions to the partners.
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 quarterly
cash distributions in 1997 to the Limited Partners at the rate of
$12.50 per Interest (5.0% per annum on the original capital
investment of $1,000 per Interest). This intention will require
cash distributions to the limited partners of approximately
$670,000 during 1997. Through December 31, 1996 the Partnership
distributed approximately $11.2 million to the limited partners
since inception. Cumulative cash distributions range from $566 to
$717 per Interest of an original holder depending upon the date of
purchasing the Interest.
Scheduled mortgage debt principal reductions are approximately
$276,000 in 1997.
Other than the payments described above, 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, 1996 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.
The reported earnings per Limited Partner Interest in 1996 reflects
a change in the number of Limited Partner Interests outstanding
which occurred in November by the repurchase of 4,066.036 Limited
Partner Interests.
Prospective Information
The refinancing of the Town Place mortgage created 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. During 1996 the General Partner considered
the possibility of expanding existing real estate operations by
seeking the acquisition of additional residential apartment
complexes, but determined to use the refinancing proceeds, if
necessary, to repurchase Limited Partnership Interests in the
tender offer.
In order for the Partnership to meet its 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 could
reduce the opportunity that the Partnership would be able to fully
meet 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 the current value of the
Partnership's properties is more likely than not to increase in the
future. There can, of course, be no assurance that such
appreciation will occur, or if it does occur, that it will result
in any specific level of return to the Partners.
The 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 three properties owned by the
Partnership were acquired between January 1989 and November 1993.
The General Partner believes that the Partnership may be required
to retain the properties for an additional period in order to
maximize the potential profit on sale. Therefore, the Partnership
may continue to operate its existing three Apartments and possibly
exchange for another property. Accordingly, liquidation of the
Partnership is not anticipated to begin before 1999.
While the General Partner believes the Partnership will be best
served by waiting to liquidate the Partnership's properties until
a capital gains tax is enacted and until the emerging increase in
rental rates matures, the General Partner's position is that the
properties are always open for offers and that any reasonable offer
will be seriously considered. This is not a change in policy and
merely reflects the General Partner's striving to meet the
investment objectives of the Partnership. The General Partner
consistently tests the market to determine if a buyer can be found
at a price that will be sufficient to meet the investment goals of
the Partnership. The General Partner has and will continue to
explore liquidation possibilities and will seriously consider any
offer for a property which meets the investment objectives of the
Partnership.
As a result of suggestions recently received from limited partners,
however, the General Partner will increase efforts during 1997 to
attract a reasonable offer for any or all of the properties and
shall report to the Limited Partners on the results of those
efforts.
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
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.
In 1996 the Partnership engaged an environmental services firm to
inspect and test The Meadows II Apartments in Madison, Wisconsin
for the presence of lead-based paint. Federal law became effective
in 1996 to require that notification be given to renters,
contractors, and purchasers of an interest in residential real
property on which a residential dwelling was built prior to 1978
(such as The Meadows II Apartments) that such property may present
exposure to lead from lead-based paint that may place young
children at risk of developing lead poisoning. A letter report
dated September 30, 1996 was obtained from the environmental
services firm regarding the results of testing for lead-based paint
at The Meadows II along with a Certificate of No Indication of
Lead-Based Paint under EPA Regulations. The Partnership paid
$2,585 for the lead-based paint inspection project.
The Partnership did not have any expenditures in 1996 for
environmental capital projects or for operation and maintenance of
environmental protection facilities. The Partnership estimates
that during 1997 and 1998 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
adopted Statement 121 in the first quarter of 1996 with no impact
on the financial statements.
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 $6.10 million in 1994 to $5.68
million in 1995 (a 6.9% decrease) to $6.08 million in 1996 (a 7.1%
increase). The fluctuating revenue is due to changes in asking
rents and changes in the number of rental units available. Ashley
Pointe was disposed and not replaced in 1994 which decreased the
number of apartment units available for rent by 200. Gross
potential rent at Pelican Sound increased from $2,450,000 in 1994
to $2,534,000 in 1995 (a 3.4% increase) to $2,592,000 in 1996 (a
2.3% increase). Gross potential rent at The Meadows II increased
from $2,122,000 in 1994 to $2,149,000 in 1995 (a 1.3% increase) and
then decreased in 1996 to $2,136,000 (a 0.6% decrease). Gross
potential rent at Town Place increased from $1,582,000 in 1994 and
to $1,616,000 in 1995 (a 2.1% increase) to $1,653,000 in 1996 (a
2.3% 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 27 years for buildings and improvements as of
December 31, 1996. 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
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 exchanged.
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
1996, 1995, and 1994.
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 43), graduated with a BBA in 1975 and
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 52), 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 47), 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 and a Series 39 as
a Direct Participation Programs 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.
(f) Involvement in certain legal proceedings. None.
Item 11. Executive Compensation
(a) Cash compensation
(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) Aggregated option/SAR exercises and value table. N/A.
(e) Long-term incentive plan awards table. N/A.
(f) Defined benefit or actuarial plan disclosure. N/A.
(g) Compensation of directors. None.
(h) Employment contracts and change in control arrangement. None.
(i) Report on repricing of options/SAR's. None.
(j) Additional Information with Respect to Compensation Committee
Interlock and Insider Participations. N/A.
(k) Board compensation committee report on executive
compensation.
N/A.
(l) Performance graph. 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 March 25, 1997:
Title of Class Amount Owned Percent of Class
Limited Partner Interests 193.04 1.441%
Relatives and affiliates of the General Partner own 35.69
additional Interests and Decade Properties, Inc., a corporation
wholly owned by Mr. Keierleber, owns 7.0 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 $93,929 in 1996.
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 1996 Decade
Properties, Inc. earned property management fees of $471,576,
reimbursed expenses of $906,474 including the site property
management staff, and interest on real estate 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, 1996, cash distributions
amounting to $2,730 were accrued but not paid to the General
Partner. The distributions paid to the General Partner during
1996 amounted to $2,824.
When the Partnership sells or refinances Partnership property, the
net sale proceeds resulting therefrom after repayment of any
General 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, 1996 and 1995
Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Statements of Partners' Capital for the years
ended December 31, 1996, 1995, and 1994
Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994
Notes to Financial Statements, December 31,
1996
(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 3--Real Estate and Accumulated Depreciation.
Schedule 4--Mortgage Loans on Real Estate
All other schedules for which provision is made in the
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 Agreement,
previously filed with Form 8A.
Exhibit 10 Forms of Material Contracts
(10.1) Form of Acquisition Agreement,
previously filed with Registration
Statement on August 28, 1985.
(10.2) Management Consulting Agreement,
previously filed with Registration
Statement on August 28, 1985.
(10.3) Form of Property Management
Agreement. (filed herewith).
(10.4) Security Agreement between
Partnership and Home Savings of
America, F.A., previously filed with
Amendment No. 1 to Form 10-K/A on
December 5, 1996.
(10.5) Mortgage for Adjustable Interest
Rate Loan between Partnership and
Home Savings of America, F.A.,
previously filed with Amendment No.
1 to Form 10-K/A on December 5,
1996.
(10.6) Mortgage Modification Agreement
between Pelican Sound Apartments,
Inc., Fengar Investment Corporation,
and River Bank America, previously
filed with Amendment No. 1 to Form
10-K/A on December 5, 1996.
(10.7) Term Loan Agreement between River
Bank America, Pelican Sound
Apartments, Inc. and Fengar
Investment Corporation, previously
filed with Amendment No. 1 to Form
10-K/A on December 5, 1996.
(10.8) Loan Agreement between Republic Bank
and the Partnership, previously
filed with Amendment No. 1 to Form
10-K/A on December 5, 1996.
(10.9) Mortgage between Republic Bank and
the Partnership, previously filed
with Amendment No. 1 to Form 10-K/A
on December 5, 1996.
(10.10) Nonrecourse Agreement between Home
Savings of America and the
Partnership, previously filed with
Amendment No. 1 to Form 10-K/A on
December 5, 1996.
(10.11) Mortgage Consolidation and
Modification Agreement between
Pelican Sound Limited Partnership
and River Bank America, previously
filed with Amendment No. 1 to Form
10-K/A on December 5, 1996.
(10.12) Fee Agreement For Purchase and Sale
of Pelican Sound, previously filed
with Amendment No. 1 to Form 10-K/A
on December 5, 1996.
(10.13) Regulatory Agreement Concerning The
Meadows loans, previously filed with
Amendment No. 1 to Form 10-K/A on
December 5, 1996.
Exhibit 27 Financial Data Schedule
Exhibit 99 Lawsuit Settlement Agreement, dated March 13,
1997. (filed herewith).
(b) Reports on Form 8-K filed in the fourth quarter of 1996.
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>
<PAGE>
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 31, 1997 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 31, 1997 By/s/ Jeffrey L. Keierleber
Dated Jeffrey L. Keierleber, Principal Executive
Officer and Principal Financial and Accounting
Officer of the Registrant
<PAGE>
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
YEAR ENDED DECEMBER 31, 1996
DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP
BROOKFIELD, WISCONSIN
<PAGE>
<PAGE>
Financial Statements and
Other Financial Information
Decade Companies Income Properties-A
Limited Partnership
Years ended
December 31, 1996 and 1995
<PAGE>
<PAGE>
Decade Companies Income Properties-
A Limited Partnership
Financial Statements
and Other Financial Information
Years ended December 31, 1996 and 1995
Contents
Report of Independent Auditors . . . . . . . . . . . . . . 1
Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . 3
Statements of Partners' Capital . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . 6
Other Financial Information
Details of Income (Loss) from
Investment Property Operations . . . . . . . . . . . . .18
<PAGE>
<PAGE>
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, 1996 and 1995, and the related
statements of operations, partners' capital and cash flows for
each of the three years in the period ended December 31, 1996.
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, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
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 17, 1997
Except for Note 9, as to which
the date is March 20, 1997
<PAGE>
<PAGE>
Decade Companies Income Properties-
A Limited Partnership
Balance Sheets
December 31
1996 1997
Assets
Cash and cash equivalents $2,620,423 $56,316
Exchange escrow (Note 4) - 497,390
Prepaid expenses and other assets 135,574 137,820
Escrow deposits 177,901 186,703
Investment properties, at cost:
Land 5,305,536 5,305,536
Buildings and improvements 23,308,727 23,308,727
Equipment 2,488,934 2,312,974
31,103,197 30,927,237
Less accumulated depreciation (6,487,269) (5,393,539)
24,615,928 25,533,698
Debt issue costs, net of accumulated
amortization ($46,348--1996;
$88,193--1995) 231,186 46,440
$27,781,012 $26,458,367
Liabilities and Partners' capital
Liabilities:
Tenant security deposits $174,129 $169,369
Accounts payable 111,564 81,354
Accrued real estate taxes 235,181 269,368
Accrued interest payable 37,498 37,971
Distributions payable 170,233 221,154
Payables to affiliates 3,470,161 3,409,338
Mortgage notes payable 23,184,986 19,228,533
27,383,752 23,417,087
Partners' capital
General Partner (deficit) (74,801) (69,185)
Limited Partners (Interests
authorized--18,000; Interests
outstanding--13,400.27 in 1996 and
17,466.31 in 1995) 472,061 3,110,465
397,260 3,041,280
$27,781,012 $26,458,367
<PAGE>
<PAGE>
Decade Companies Income Properties-
A Limited Partnership
Statements of Operations
Year ended December 31
1996 1995 1994
__________________________________
Operating revenue
associated with
investment properties:
Rentals $ 5,838,844 $ 5,526,011 $ 5,941,610
Other 244,275 154,528 158,286
______________________________________
6,083,119 5,680,539 6,099,896
Operating expenses
associated with
investment properties:
Operating 2,563,565 2,336,602 2,394,388
Administrative 256,871 300,830 289,678
Depreciation 1,093,732 1,110,967 1,242,885
Interest, including
amortization of
debt issue costs 1,659,554 1,479,874 1,707,904
Real estate taxes 699,785 740,582 761,975
______________________________________
6,273,507 5,968,855 6,396,830
______________________________________
Loss from operations
of inventment
properties (190,388) (288,316) (296,934)
Other Partnetship
income (expenses):
Interest income 152,515 43,069 177,404
Interest on payables
to affiliates (28,588) (33,550) (28,764)
Administrative expenses (222,160) (190,901) (194,405)
Loss on disposition
of investment
property - - (1,071,710)
Forfeiture fee earned - - 100,000
______________________________________
(98,233) (181,382) (1,017,475)
______________________________________
Net Loss $ (288,621) $ (469,698) $(1,314,409)
______________________________________
Net loss attributable
to General Partner (1%) $ (2,886) $ (4,667) $ (13,144)
Net loss attributable
to Limited Partners (1%)$ (285,735) $ (469,698) $(1,301,265)
______________________________________
$ (288,621) $ (469,698) $(1,314,409)
______________________________________
Net loss per weighted
average Limited
Partnership Interest $ (16.69) $ (26.62) $ (74.50)
______________________________________
See accompanying notes.
<PAGE>
<PAGE>
<TABLE>
Decade Companies Income Properties-
A Limited Partnership
Statements of Partners' Capital
<CAPTION>
General
Limited Partner's Limited
Partnership Capital Partners'
Interests (Deficit) Capital
Total
_______________________________________________________
<S> <C> <C> <C>
<C>
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
Distributions to
Partners - (2,730) (604,163)
(606,893)
Repurchase of
Limited Partners'
Interests (4,066.04) - (1,634,546)
(1,634,546)
Tender offer costs - - (113,960)
(113,960)
Net loss for the year - (2,886) (285,735)
(288,621)
____________________________________________________
Balances at
December 31, 1996 13,400.27 $(74,801) $ 472,061
$ 397,260
____________________________________________________
( ) Denotes deduction or deficit.
</TABLE>
<PAGE>
<PAGE>
Decade Companies Income Properties-
A Limited Partnership
Statements of Cash Flows
Year ended December 31
1996 1995 1994
________________________________
Operating activities
Net loss for the year $(288,621) $(469,698) $(1,314,409)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation 1,093,732 1,110,967 1,242,885
Loss on disposition
of investment
property - - 979,610
Amortization of debt
issue costs 23,261 16,357 16,302
Changes in operating
assets and
liabilities:
Prepaid and other
assets 2,246 (56,600) 42,464
Escrow deposits 8,802 (7,822) 2,686
Security deposits
payable 4,760 2,692 (29,945)
Accounts payable 30,210 27,480 (67,453)
Accrued real estate
taxes (34,187) 8,854 (9,407)
Accrued interest
payable (473) 99 (43,453)
Payables to affiliates 60,823 23,322 101,350
____________________________________
Net cash provided
by operating activities 900,553 655,651 920,630
Investing activities
Proceeds from disposition
of investment property - - 2,990,181
Withdrawal from (deposit
to) Like-Kind Exchange
Escrow Trust 497,390 620,141 (1,117,531)
Net additions to
investment properties (175,960) (177,334) (159,791)
Redemption of short-term
investments - - 4,000,000
____________________________________
Net cash provided by
investing activities 321,430 442,807 5,712,859
Financing activities
Repurchase of Limited
Partners' Interests (1,634,546) - -
Payment of tender
offer costs (113,960) - -
Net proceeds from
issuance of mortgage
note payable 6,700,000 - -
Proceeds from note
payable to bank - 120,000 100,000
Payments on note
payable to bank - (220,000) -
Additions to debt
issue costs (208,009) (10,000) (13,606)
Payments on mortgage
notes payable (2,743,547) (72,260) (6,029,737)
Distributions paid to
Limited Partners (654,990) (873,320) (873,320)
Distributions paid to
General Partner (2,824) (2,977) (12,668)
____________________________________
Net cash provided by
(used in) financing
activities 1,342,124 (1,058,557) (6,829,331)
____________________________________
Increase (decrease) in
cash and cash
equivalents 2,564,107 39,901 (195,842)
Cash and cash
equivalents at
beginning of year 56,316 16,415 212,257
____________________________________
Cash and cash
equivalents at end
of year $2,620,423 $56,316 $16,415
See accompanying notes.
<PAGE>
<PAGE>
Decade Companies Income Properties-
A Limited Partnership
Notes to Financial Statements
December 31, 1996
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 1,426 Limited Partners at
December 31, 1996.
Basis of Accounting
The accompanying financial statements, which have been prepared
in accordance with generally accepted accounting principles
(GAAP), will differ from the income tax returns due to the
different treatment of various items as specified by the Internal
Revenue Code. The net effect of these accounting differences is
as follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
____________________________________________________________
GAAP Tax GAAP Tax GAAP Tax
Basis Basis Basis Basis Basis Basis
____________________________________________________________
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total assets $27,781 $27,563 $26,458 $26,132 $27,914 $27,574
Partners' capital
(deficit):
General Partner (75) (63) (69) (60) (61) (52)
Limited Partners 472 5,593 3,110 6,360 4,449 7,617
Net loss:
General Partner (3) (1) (5) (4) (13) (12)
Limited Partners (286) (103) (465) (443) (1,301) (1,169)
</TABLE>
<PAGE>
<PAGE>
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 amounts reported
in the financial statements and accompanying notes. 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.
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.
Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, 'Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of,' under which the
Partnership would be required to recognize impairment losses on
long-lived assets used in operations when indicators of
impairment are present and the uindiscounted cash flows of those
assets are not sufficient to recover the assets' carrying amount.
The Partnership adopted Statement No. 121 during 1996 with no
impact on the accompanying financial statements.
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 7).
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:
Debt Finance Costs
Debt financing costs are amortized using the straight-line method
over the term of the agreement (see Note 5) and are included as a
component of interest expense in the financial statements.
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. The fee is defined in the partnership
agreement.
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 Offerings
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, as well as
certain costs associated with tender offer purchases of Limited
Partner Interests.
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.
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 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.
3. Repurchase of Limited Partners' Interests
On November 29, 1996, the Partnership repurchased and retired
4,066.036 Limited Partnership Interests for $402 per Interest.
The Partnership paid $1,634,546 to these Limited Partners prior
to December 31, 1996. Costs related to the tender offer amounted
to approximately $113,960 in 1996, and were charged against
Limited Partners' capital.
4. Investment Properties
Investment properties owned at December 31, 1996, are as follows:
<PAGE>
<PAGE>
<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 $ 6,628 $1,144 $ 9,227 $ 442 $ 7 $322
Town Place
Apartments
Clearwater,
Florida 6,662 1,518 5,270 252 - 389
Pelican Sound
Apartments
St. Petersburg,
Florida 9,895 2,644 8,801 861 4 223
_______________________________________________________________________
$23,185 $5,306 $23,298 $1,555 $11 $934
_______________________________________________________________________
</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 $ 764 $11,142 $3,083
Town Place
Apartments
Clearwater,
Florida 1,518 5,270 641 7,429 1,758
Pelican Sound
Apartments
St. Petersburg,
Florida 2,644 8,805 1,084 12,533 1,646
_______________________________________________________________________
$5,306 $23,309 $2,489 $31,104 $6,487
_______________________________________________________________________
</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 1983 February 1990
Pelican Sound Apartments
St. Petersburg, Florida 1987 November 1993
</TABLE>
<PAGE>
<PAGE>
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. Funds were
withdrawn from the Trust in 1995 and 1996 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, 1996, and is subordinated as set forth
in Note 2.
A reconciliation of the cost and accumulated depreciation of the
investment properties at December 31 follows:
1996 1995 1994
_____________________________
(In Thousands)
Cost:
Balance at beginning of year $30,928 $30,750 $35,387
Acquisition of investment
properties - --
Additions to investment
properties 176 178 160
Disposal of investment
property - - (4,797)
Balance at end of year $31,104 $30,928 $30,750
Accumulated depreciation:
Balance at beginning of year $ 5,393 $ 4,282 $ 3,867
Provision for the year 1,094 1,111 1,242
Disposal of investment
property - - (827)
Balance at end of year $ 6,487 $ 5,393 $ 4,282
The aggregate cost of the investment properties for federal
income tax purposes is $28,220,528 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
$6,111,750, $5,142,113 and $4,030,227 at December 31, 1996, 1995
and 1994, respectively.
5. Mortgage Notes Payable
Mortgage notes payable consist of the following:
December 31
1996 1995
______________________________
Mortgage note payable in
monthly installments of
$21,952, including interest
at 7.5%, with final payment
due December 1, 2021. $ 2,970,524 $ 3,009,554
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 (7.314% at
December 31, 1996).
Monthly payments of
principal and interest
are computed annually
($27,890 commencing
January 1, 1997). The
final payment is due
December 10, 2004. 3,657,877 3,718,979
Mortgage note payable in
monthly installments of
$52,286, including interest
at 8.25%, with final
payment due May 16, 2003. 6,661,757 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. 9,894,828 10,000,000
________________________________
$23,184,986 $19,228,533
________________________________
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.
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 $1,636,766, $1,454,778 and $1,735,055 in 1996, 1995 and 1994,
respectively. Aggregate annual maturities of the mortgage notes
payable for the five years subsequent to December 31, 1996, are
as follows: $276,000--1997; $9,970,000--1998; $197,000--1999;
$213,000--2000 and $231,000--2001.
6. Income Taxes
The Partnership pays no income taxes. Partnership losses or
income and taxes attributable thereto will be the responsibility
of the various Partners.
Differences between the net loss as reported herein and net loss
reported for federal income tax purposes arise from temporary
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:
Year ended December 31
1996 1995 1994
___________________________________
Net loss as reported
for financial reporting
purposes $(288,621) $(469,698) $(1,314,409)
Add:
Depreciation 124,096 (917) 22,782
Loss on disposition
of investment property - - 100,752
Accrual basis adjustments 60,824 23,321 9,250
___________________________________
Net loss reported for
federal income tax
purposes $(103,701) $(447,294) $(1,181,625)
___________________________________
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
Acquisition fees of $2,146,635 are payable to Decade
Companies at December 31, 1996 and 1995. Such fees were
capitalized as part of the cost of the investment
properties. Interest on acquisition fees was not earned by
Decade Companies in 1996, 1995 or 1994 due to a fee
limitation imposed by the prospectus. Accrued interest on
these fees was $397,671 at December 31, 1996 and 1995.
In addition, mortgage placement fees of $90,246 are payable
to Decade Companies at December 31, 1996 and 1995.
Decade Properties
Decade Properties earned the following amounts from the
Partnership: property management fees ($471,576--1996;
$449,205--1995; $489,960--1994), and interest on real estate
sales commissions ($28,588--1996; $28,588--1995; $26,570--
1994).
Real estate sales commissions of $440,700 are payable to
Decade Properties at December 31, 1996 and 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). Accrued interest
on these fees was $319,204 and $290,616 at December 31, 1996
and 1995.
In addition, other miscellaneous amounts are payable
including payroll reimburse-ment and property management
fees totaling $75,705 and $43,470 at December 31, 1996 and
1995.
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 1996, 1995 and 1994.
Reimbursed expenses paid by the General Partner or affiliates of
the General Partner on behalf of the Partnership were as follows:
Decade Companies ($93,929--1996; $89,962--1995; $84,471--1994)
and Decade Properties, Inc. ($906,474--1996; $929,883--1995;
$878,934--1994).
8. Fair Values of Financial Instruments
Cash and Cash Equivalents
The carrying amount reported in the balance sheet for cash and
cash equivalents approximates its fair value.
Long-Term Debt
The fair value of the Partnership's mortgage notes payable is
estimated using a discounted cash flow analysis, based on the
borrowing rates for similar types of borrowing arrangements. The
fair value based on this analysis is approximately $22,290,000
for all mortgages at December 31, 1996.
9. Litigation
In December of 1996, the Partnership and certain affiliated
entities commenced a civil action against a Limited Partner and
certain affiliates (defendants) alleging damages for, among
others, fraud and violations of securities laws. The defendants,
in turn, counterclaimed, alleging the same causes of action. The
ultimate outcome of these matters cannot be determined at this
time; however, in the opinion of management of the Partnership,
the eventual outcome of these matters will not have a material
adverse effect on the financial position of the Partnership. The
financial statements do not include any adjustments for
liability, if any, arising from these matters.
Subsequently, an offer and settlement agreement was signed
effective March 13, 1997, and the lawsuit was dismissed on March
20, 1997, resulting in no significant obligation or liability of
the Partnership.
<PAGE>
<PAGE>
<TABLE>
Decade Companies Income Properties-
A Limited Partnership
Details of Income (Loss) From Investment Property Operations
Year ended December 31, 1996
<CAPTION>
Meadows II Town Place Pelican Sound
Apartments Apartments Apartments Total
___________________________________________________
<S> <C> <C> <C> <C>
Operating revenue associated with
investment properties:
Rentals $1,886,789 $1,515,715 $2,436,340 $5,838,844
Other 66,874 80,915 96,486 244,275
1,953,663 1,596,630 2,532,826 6,083,119
Operating expenses associated with
investment properties:
Operating 774,011 671,396 1,118,158 2,563,565
Administrative 76,127 67,320 113,424 256,871
Depreciation 353,479 213,860 526,393 1,093,732
Interest, including amortization
of debt issue costs 500,873 451,775 706,906 1,659,554
Real estate taxes 235,182 171,550 293,053 699,785
__________________________________________________
1,939,672 1,575,901 2,757,934 6,273,507
__________________________________________________
Income (loss) from investment
property operations $ 13,991 $ 20,729 $ (225,108) $ (190,388)
__________________________________________________
</TABLE>
<PAGE>
<PAGE>
Other Financial Information
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT, dated ______________ is by and between
DECADE COMPANIES INCOME PROPERTIES, A LIMITED PARTNERSHIP, a
Wisconsin limited partnership ("Owner") and DECADE PROPERTIES
INC., a Wisconsin corporation ("Manager").
BACKGROUND:
Owner proposes to acquire a _____-unit apartment complex
located in ________________, known as _______________________
(the "Apartments"). In connection with such acquisition, Owner
desires to retain Manager to manage the Apartments on behalf of
Owner on the terms and for the compensation set forth below.
THE PARTIES, THEREFORE, AGREE AS FOLLOWS:
1. Appointment and Acceptance. Owner hereby appoints and
retains Manager to perform the services set forth herein, and
Manager hereby accepts such appointment and employment, subject
to the conditions of this Agreement.
2. Efforts and Conflicts. Manager agrees to use
commercially reasonable and continual efforts to fulfill its
obligations hereunder. Owner acknowledges that Manager has been,
is and will be engaged to perform duties for other entities,
including Affiliates of Owner and of Manager, that are similar to
those duties to be performed under this Agreement. Owner further
acknowledges that it has no exclusive right to Manager's
services.
3. Term of Agreement. This Agreement shall remain in full
force and effect until terminated as provided below.
4. Compensation. For services rendered hereunder, Owner
shall pay to Manager: (a) an amount equal to five percent (5%)
of rental income received from the Apartments (excluding security
deposits), plus any miscellaneous income received from the
operation of the Apartments (including rental of parking spaces,
coin-operated laundry facilities, and security deposits retained
for breach of leases and resident damage), and an amount equal to
one-half of the first month's rent on any newly-leased apartment
unit payable monthly. The parties acknowledge that this
compensation is competitive with that charged in the area for
comparably sized projects and for comparable quality and quantity
of services.
5. Manager's Authority, Duties and Obligations. During
the term of this Agreement, Manager shall provide the following
services and, in the performance of such services, shall have the
authority indicated to act as agent on behalf of Owner:
(a) To advertise the availability for rental of the
Apartments or any part thereof, and to display "For Rent" signs
thereon; to sign, renew and/or cancel leases for the Apartments
or any part thereof in Manager's own name without prior approval
of Owner; to collect rents due or to become due and give receipts
therefor; to terminate tenancies and to sign and serve in its own
name or in the name of Owner such notices as are appropriate; to
institute and prosecute legal actions; to evict tenants and to
recover possession of the Apartments; to sue for, in its own name
or in the name of Owner, and recover rents and other sums due;
and when expedient, to settle, compromise and release such
actions or suits or reinstate such tenancies. Any residential
lease executed for Owner by Manager shall not exceed a period of
one (1) year.
(b) To keep the Apartments in good condition and
repair under the supervision of Owner; to make or cause to be
made and to supervise repairs and alterations on Owner's behalf;
to purchase supplies and pay all bills therefor. Manager agrees
to secure the prior approval of Owner on all expenditures in
excess of $1,000 for any one item, except monthly or recurring
operating charges and/or emergency repairs in excess of such
maximum, if, in the opinion of Manager, such repairs are
necessary to protect the Apartments from damage, or to maintain
services to the tenants as called for in their leases.
(c) To hire, discharge and supervise all independent
contractors retained in connection with the operation and
maintenance of the Apartments.
(d) To borrow money in the name of Owner provided such
funds are used exclusively for payment of expenses related to the
Apartments.
(e) To make contracts for electricity, gas, fuel,
water, telephone, window cleaning, ash or rubbish hauling and
other services or such of them as Manager shall deem advisable.
(f) To carry at Owner's expense, necessary public
liability insurance with a minimum limit of $1,000,000 in
coverage and workmen's compensation insurance adequate to protect
the interests of the parties hereto, which policies shall, if
possible, be so written as to protect Manager in the same manner
and to the same extent they protect Owner, and will name Manager
as an additional insured under the policy;a nd acquire fire,
liability, steam boiler, pressure vessel, or any other insurance
required.
(g) To pay on behalf and at the direction of Owner,
mortgage and other indebtedness relating to the Apartments.
(h) To follow the directions of any consultants
retained by Owner for the establishment of the Apartments'
procedures and controls.
(i) To bond by a fidelity bond all of Manager's
employees who are responsible for the handling of money.
(j) To pay all taxes and special assessments for
public improvements now or hereafter assessed or levied against
and on the Apartments as they become due and to deliver to Owner
and to Owner's mortgagee, copies of receipts evidencing payment
thereof. Payments may be made in installments as permitted by
the municipality.
(k) To pay all costs of data processing and/or
computer processing charges in connection with the accounting and
controls established by Owner for the Apartments.
(l) To perform such other services as may be
reasonably directed by Owner in the diligent management of the
Apartments.
6. Records and Reports. Manager will have the following
responsibilities with respect to records and reports:
(a) Manager, at the direction and expense of Owner,
will maintain a comprehensive system of records, books and
accounts relative to the operation of the Apartments (as opposed
to the Partnership records and accounts of Owner) in a manner
satisfactory to Owner and according to systems and procedures
established for Owner by Manager under separate agreement. All
records, books and accounts shall be subject to examination at
reasonable hours by any authorized representative of Owner.
(b) Manager shall render monthly statements of
receipts and disbursements and remit the balance due Owner after
deduction of the amounts payable to Manager pursuant to
Paragraphs 4 and 7 hereof.
(c) Manager will furnish such information (including
occupancy reports) as may be requested by Owner from time to time
with respect to the financial, physical or operational condition
of the Apartments.
7. Reimbursement of Expenses. In addition to the
compensation payable under Paragraph 4, above, Owner shall
reimburse Manager for the cost of all goods, materials, and
services used for or by Owner, including without limitation,
telephone, computer and equipment costs, and for all expenses on
an accountable basis incurred in connection with services
performed by employees of Manager including without limitation,
services relating to the collection of rents, services relating
to the maintenance of the Apartments, accounting services, legal
services and secretarial services. In the case of services
performed by employees of Manager, the reimbursable costs shall
be based upon the time actually spent by such employees in
performing such services as supported by time records multiplied
by a rate established by Manager to cover overhead and expenses
incurred to discharge Manager's duties hereunder; however, such
amounts charged to the Partnership will not exceed those which
Owner generally would be required to pay to independent parties
for comparable services in the area in which the Apartments are
located.
8. Termination of Agreement. Either party hereto may
terminate this Agreement upon one hundred twenty days (120) prior
written notice without penalty. Owner shall pay over to Manager
upon the termination by either party, all accrued but unpaid
property management fees plus any amounts payable pursuant to
Paragraph 7.
9. Pending Leases. Upon and after the termination of the
Agreement pursuant to Paragraph 8, above, Owner shall pay to
Manager, in one lump sum, an amount equal to five percent (5%) of
the rental to be paid after the date of termination under leases
for apartment units in force as of such date for the balance of
the terms of such leases. In addition, Owner shall recognize
Manager as the broker in any pending negotiations for the rental
of any apartment units, and in the event of the consummation of
such lease, Owner shall pay to Manager, in one lump sum on the
date of said consummation, a commission at the rate of five
percent (5%) of the total rental to be paid under such new
leases.
10. Entire Agreement, Amendments. This Agreement
constitutes the entire understanding between the parties hereto
with respect to the subject matter hereof. The rights and
obligations specified herein are intended to be construed as
separate and independent from any other prior, contemporaneous or
subsequent agreements among the parties hereto. No amendment or
modification of the Agreement will be valid unless made by
supplemental agreement in writing.
11. Assignability. The rights under this Agreement may be
assigned and the duties hereunder may be delegated by Manager
without the consent of Owner provided that such delegation shall
not relieve Manager of its obligations to Owner hereunder.
12. Severability. If any of the provisions of this
Agreement are judicially held to be invalid, the remainder of
this Agreement shall not be affected thereby.
13. Choice of Law. This Agreement shall, in all respects,
be governed by, and construed in accordance with, the laws of the
State of Wisconsin.
<PAGE>
DECADE PROPERTIES INC. DECADE COMPANIES INCOME
PROPERTIES, A LIMITED
PARTNERSHIP
BY: DECADE COMPANIES
By: ________________________ By:___________________________
By: ________________________ By: _________________________
March 13, 1997
Mr. Jeffrey Keierleber
Decade Companies
Suite 140
250 North Patrick Boulevard
Brookfield, WI 53045
Re: Offer and Settlement Agreement
Dear Mr. Keierleber:
1. We hereby confirm our offer to facilitate sales as a
broker-dealer to you of limited partnership interests
("Interests") in Decade Companies Income Properties--A Limited
Partnership ("DCIP") held by Arnold K. Leas ("Leas"), Affiliates
(as defined below) of Leas, clients of Wellington Investment
Services Corp. and holders who affirmatively voted for a change
in general partner in the recently terminated Wellington proxy
solicitation and who did not revoke such consent (collectively
"Wellington Clients"). We will deliver a list of those persons
to you within 10 days subject to the conditions in this letter.
The price to you will be $605 for Interests received by you on or
before April 14, 1997 and $592.50, net for Interests received on
or before May 5, 1997. Wellington Investment Services Corp.
intends to charge a 10% commission ($55) on each Interest
delivered on or prior to April 14, 1997 and a $42.50 commission
on each Interest delivered between April 15 and May 5, 1997,
which is included in the net price. You agree to purchase and
pay the purchase price and commission (totaling $605, net or
$592.50, net as the case may be) for each Interest within 10 days
of delivery of the properly executed instruments of assignment
(attached hereto), for all Interests delivered until May 5, 1997.
In making this arrangement, Leas and Wellington Investment
Services Corp. agree to comply with all federal and state
securities laws. We will advise you by 9:00 a.m. on each Friday
between the date hereof and May 5, 1997 of the number of
Interests available for your purchase.
2. Wellington Investment Services Corp. agrees to offer
the Interests as a broker-dealer in the ordinary course and
represents and covenants that it will only acquire the right to
offer the Interests in a series of isolated transactions and by
means that do not constitute "general solicitation" or a "tender
offer," as the terms are understood under Section 14 of the
Securities Exchange Act of 1934, as amended, or comparable laws
of any state in which such transactions of the offer thereof
occurs.
3. For the mutual promises herein and for good and
valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, I and Wellington Management Corporation
hereby agree that for a period of ten years from the date hereof,
neither we nor any Affiliate (as that term is defined in Rule 405
under the Securities Act of 1933, as amended) of ours (regardless
of whether such person or entity is an Affiliate on the date
hereof) will (a) acquire, offer to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise, any voting
securities (including partnership interests) or direct or
indirect rights or options to acquire any securities of any
Decade sponsored entity or an Affiliate of either Decade
Companies or you, even if formed hereafter (collectively
hereafter "Decade Entity"), (b) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" to
vote (as such terms are used in the proxy rules of the Securities
and Exchange Commission), or seek to advise or influence any
person or entity with respect to the voting of any voting
securities of any Decade Entity, (c) form, join or in any way
participate in a "group" within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), with respect to any voting securities of any Decade
Entity, or (d) otherwise act, alone or in concert with others, to
seek to control or influence the management, the general partner
or policies of any Decade Entity. We acknowledge that you would
not have an adequate remedy at law for money damages in the event
that this covenant were not performed in accordance with its
terms and, therefore, agree that you shall be entitled, at your
sole choice, to specific performance or injunction or any or all
other equitable remedies in addition to any other remedy to which
you may be entitled, at law or in equity. You and any Decade
Entity agree that for a period of ten years from the date hereof
you or any Decade Entity will not (a) acquire, offer to acquire,
or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities (including partnership
interests) or direct or indirect rights or options to acquire any
securities of any Wellington sponsored entity or Affiliate of
ours ("Wellington Entity"); (b) make, or in any way participate,
directly or indirectly, in any solicitation of proxies (as
earlier defined) or seek to advise or influence any person or
entity with respect to the voting of any securities of a
Wellington Entity; (c) form, join, or in any way participate in a
"group" within the meaning of Section 13(d)(3) of the Exchange
Act with respect to any voting securities of any Wellington
Entity; or (d) otherwise act, alone or in concert with others, to
seek to control or influence the management, the general partner,
board or policies of any Wellington Entity. You acknowledge that
we would not have adequate remedy at law for money damages in the
event this covenant were not performed in accordance with its
terms and, therefore, agree that we shall be entitled at our sole
choice to specific performance or injunction, or any or all other
equitable remedies in addition to any other remedy to which we
may be entitled at law or in equity.
4. We and you will each dismiss with prejudice the
lawsuits listed in Schedule I hereto and direct our respective
attorneys to file the attached stipulated motion and order for
dismissal, and we and you hereby release and discharge each other
(and each other's present and former directors, officers,
employees, partners, predecessors, successors, assigns,
subsidiaries and affiliates) from all manner of claims, actions,
causes of action or suits, in law, or equity, which each of us
now has or hereafter can, shall, or may have by reason of any
matter, cause or thing whatsoever from the beginning of the world
to the date of this Agreement, including without limitation any
claims arising out of, in connection with, or in any way related
to, purchases or sales of, or attempts to purchase or sell, by
anyone, securities of DCIP or any Decade Entity, excepting only
any action, cause of action or suit arising by virtue of this
Agreement.
5. We hereby represent that we are terminating our DCIP
proxy contest and will properly comply with all laws in
completing the proxy contest.
6. We hereby represent and warrant that:
(a) We are duly authorized to offer the Interests held
by Wellington Clients;
(b) The Interests offered hereby represent all of the
Interests held by Leas, Joe Griese, Bill Best, Mike Voss, or
an Affiliate of Leas;
(c) This offer is by means that do not give rise to a
tender offer; and
(d) We will not disparage you or a Decade Entity in
connection with the offer herein or otherwise.
7. You hereby represent and warrant that you will not
disparage Leas or a Wellington Entity in connection with the
offer or otherwise.
8. We indemnify you for any damages (including reasonable
attorneys fees and costs, claims, obligations, costs of defense,
actual punitive or consequential, foreseen or unforeseen, known
or unknown, damages, awards or judgments of any kind or nature)
you or any Decade Entity shall incur under the securities laws in
acquiring or offering the Interests from Wellington Clients
arising from a violation of federal or state securities laws by
Leas or Wellington Investment Services Corp. or from our offer
being considered a tender offer.
9. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Wisconsin.
10. We shall not send any letters concerning this offer to
any DCIP limited partner unless reviewed and approved by our
counsel, Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S.C.
and in such case only to a Wellington Client.
Very truly yours,
WELLINGTON MANAGEMENT
CORPORATION and WELLINGTON
ENTITIES
By: /s/Arnold K. Leas
President
ARNOLD K. LEAS
By: /s/Arnold K. Leas
Arnold K. Leas
WELLINGTON INVESTMENT SERVICES
CORP.
By: /s/Arnold K. Leas
Arnold K. Leas
WMC REALTY INC.
By: /s/Arnold K. Leas
Arnold K. Leas
Accepted and Agreed:
Jeffrey Keierleber
By: /s/Jeffrey Keierleber
Individually and on behalf
of Decade Entities
/s/Jeffrey Keierleber
Decade Companies Income Properties
By: Jeffrey Keierleber
/s/Jeffrey Keierleber
Decade Companies
By: Jeffrey Keierleber, General
Partner
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,798,324
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,933,898
<PP&E> 31,103,197
<DEPRECIATION> 6,487,269
<TOTAL-ASSETS> 27,781,012
<CURRENT-LIABILITIES> 4,198,766
<BONDS> 23,184,986
<COMMON> 0
0
0
<OTHER-SE> 397,260
<TOTAL-LIABILITY-AND-EQUITY> 27,781,012
<SALES> 6,083,119
<TOTAL-REVENUES> 6,235,634
<CGS> 0
<TOTAL-COSTS> 4,613,953
<OTHER-EXPENSES> 222,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,688,142
<INCOME-PRETAX> (288,621)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (288,621)
<EPS-PRIMARY> (16.69)
<EPS-DILUTED> (16.69)
</TABLE>
