U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number 0-21455.
Decade Companies Income Properties - A Limited Partnership
(Exact name of small business issuer as specified in its charter)
State of Wisconsin 39-1518732
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
250 Patrick Blvd., Suite 140 Brookfield, Wisconsin 53045-5864
(Address of principal executive offices)
(414) 792-9200
(Issuer's telephone number)
Not Applicable
Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by court. Yes No .
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
.
Transitional Small Business Disclosure Format (check one):
Yes No X .
Decade Companies Income Properties - A Limited Partnership
Form 10-QSB
INDEX
September 30, 1997
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited as to
September 30, 1997 and the nine months
then ended).
Balance Sheet at September 30, 1997. 3
Statements of Operations for the three months
and nine months ended September 30, 1997 & 1996. 4
Statements of Partners' Capital
for the nine months ended September 30, 1997
and the year ended December 31, 1996. 5
Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996. 6
Notes to Financial Statements. 7
Item 2. Management's Discussion and Analysis or Plan
of Operation 7 - 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K. 11
SIGNATURES 12
Exhibit (11) Statement Re: Computation of Earnings Per 13
Limited Partner Interest
Exhibit (27) Financial Tables
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEET
September 30, 1997
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 2,271,316
Escrow deposits 384,192
Prepaid expenses and other assets 68,195
Total Current Assets 2,723,703
INVESTMENT PROPERTIES, AT COST: 31,236,872
Less: accumulated depreciation (7,319,669)
Net Investment Property 23,917,203
OTHER ASSETS:
Utility deposits 43,415
Debt issue costs, net of accumulated
amortization 204,987
Total Other Assets 248,402
Total Assets 26,889,308
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and
accrued taxes 628,780
Tenant security deposits 149,294
Distributions payable 173,234
Accrued interest payable 37,330
Payables to affiliates 3,484,336
Mortgage notes payable 22,970,778
Total Liabilities 27,443,752
PARTNERS' CAPITAL:
General Partner Capital (82,261)
Limited Partners
(authorized--18,000 Interests;
outstanding--13,400.27 Interests) (472,183)
Total Partners' Capital (554,444)
Total Liabilities and
Partners' Capital 26,889,308
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
<S> <C> <C> <C> <C>
Operating revenue:
Rental income 1,530,957 1,527,812 4,595,783 4,501,100
Operating expenses (703,732) (731,329) (2,149,340) (2,134,331)
Real estate taxes (186,445) (176,469) (542,481) (541,049)
Total operating
expenses (890,177) (907,798) (2,691,821) (2,675,380)
Net operating income 640,780 620,014 1,903,962 1,825,720
Interest expense (451,251) (441,611) (1,326,763) (1,218,600)
Depreciation (280,900) (275,000) (832,400) (817,300)
Amortization (8,730) (10,641) (26,199) (14,538)
Net income (loss) from
investment property (100,101) (107,238) (281,400) (224,718)
Other income (expenses):
Interest income 33,638 63,821 101,613 110,216
Partnership management (22,988) (32,227) (266,201) (136,125)
10,650 31,594 (164,588) (25,909)
NET (LOSS) (89,451) (75,644) (445,988) (250,627)
Net income (loss)
attributable to
General Partner (1%) (895) (756) (4,460) (2,506)
Net income (loss)
attributable to
Limited Partners (99%) (88,556) (74,888) (441,528) (248,121)
(89,451) (75,644) (445,988) (250,627)
Net (loss) per Limited
Partner Interest (6.61) (4.29) (32.95) (14.21)
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited as to the Nine Months Ended September 30, 1997)
General Limited
Partner Partners'
Capital Capital Total
<S> <C> <C> <C>
BALANCES AT 12/31/95 (69,185) 3,110,465 3,041,280
Repurchase of Limited Partner
Interests (1,634,546) (1,634,546)
Tender offer costs (113,960) (113,960)
Distributions declared to Partners (2,730) (604,163) (606,893)
Net (loss) for the year (2,886) (285,735) (288,621)
BALANCES AT 12/31/96 (74,801) 472,061 397,260
Tender offer costs (203) (203)
Distributions declared to Partners (3,000) (502,513) (505,513)
Net (loss) for the period (4,460) (441,528) (445,988)
BALANCES AT 9/30/97 $ (82,261) $ (472,183) $(554,444)
() denotes deficit or deduction.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS - (UNAUDITED)
For The Nine Months Ended September 30,
1997 1996
CASH PROVIDED BY OPERATIONS 501,491 782,567
INVESTING ACTIVITIES:
Proceeds from exchange escrow account --- 264,330
Additions to investment property (133,675) (130,139)
Net cash provided by (used in) investing
activities (133,675) 134,191
FINANCING ACTIVITIES:
Proceeds from new mortgage loan --- 6,700,000
Principal payments on mortgage notes (214,208) (2,674,918)
Payment of tender offer costs (203) (4,950)
Payment of debt issue costs 0 (141,009)
Distributions paid to limited partners (502,512) (654,990)
Net cash provided by (used in) financing
activities (716,923) 3,224,133
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (349,107) 4,140,891
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 2,620,423 56,316
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD 2,271,316 4,197,207
Supplementary disclosure of cash flow information:
Interest paid 1,305,490 1,197,458
Income taxes paid 0 0
See Notes to Financial Statements
Note A--Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and nine month
period ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ended December 31,
1997. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report
on Form 10-K for the year ended December 31, 1996.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
Rental income was provided by the three sites for the comparative
three and nine month periods as set forth below:
Percent
For Three Months Ended Increase Increase
9/30/97 9/30/96 (Decrease) (Decrease)
Pelican Sound 684,200 656,900 27,300 4.2%
The Meadows II 456,900 468,300 (11,400) (2.4%)
Town Place 389,900 402,600 (12,700) (3.1%)
Total 1,531,000 1,527,800 3,200 .2%
Percent
For Nine Months Ended Increase Increase
9/30/97 9/30/96 (Decrease) (Decrease)
Pelican Sound 1,995,900 1,885,300 110,600 5.9%
The Meadows II 1,390,700 1,439,100 (48,400) (3.4%)
Town Place 1,209,200 1,176,700 32,500 2.8%
Total 4,595,800 4,501,100 94,700 2.1%
Operating revenue from rental income was $1,531,000 in the quarter
ended September 30, 1997, compared to $1,527,800 for the same
period of 1996, an increase of .2%. A $27,000 increase in rental
income at Pelican Sound was offset by decreases at Town Place
($13,000) and The Meadows II ($11,000) resulting in a net increase
of $3,000 for the quarter. The increased revenue at Pelican Sound
is attributable to both rent increases and higher occupancy.
Although asking rents increased and occupancy increased at Meadows
II, the rental income declined due to an increase in rent
concessions which were allowed in an effort to stimulate occupancy.
At Town Place the decrease in rental revenue was attributable to a
decrease in occupancy resulting from aggressive increases in asking
rents.
For the nine month period ended September 30, 1997 rental income
was $4,595,800 compared to $4,501,100 for the same period in 1996,
an increase of 2.1%. A $111,000 increase at Pelican Sound and a
$32,000 increase at Town Place was offset by a $48,000 decrease at
The Meadows II resulting in a $95,000 increase for the nine month
period. The increased revenue at Pelican Sound is attributable to
both rent increases and higher occupancy (more than 97% in the 1997
period). The increased revenue at Town Place is attributable to
higher rent collections while occupancy remained stable at
approximately 93% for the comparative periods.
The average monthly gross potential rent per unit at the Apartments
for the third quarter of 1997 and for the nine month period of
1997, and the comparative periods in 1996, is set forth below:
Number Three Months Ended Nine Months Ended
of Units 9/30/97 9/30/96 9/30/97 9/30/96
Pelican Sound 379 $590 $572 $584 $568
The Meadows II 316 $582 $565 $577 $562
Town Place 240 $594 $576 $588 $573
All Rental Units 935 $589 $571 $583 $567
"Gross potential rent" represents the asking rent established by
the Partnership for a vacant apartment plus the rent in effect for
occupied apartments.
The average occupancy level at the Apartments for the third quarter
ended September 30, 1997 and for the nine month period of 1997, and
the comparable periods in 1996, is set forth below:
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
Pelican Sound 97.0% 94.2% 97.3% 94.7%
The Meadows II 88.9% 87.7% 87.0% 89.8%
Town Place 91.0% 95.9% 92.8% 93.0%
All Rental Units 92.7% 92.4% 92.7% 92.6%
The range of occupancy levels at the Apartments for the third
quarter period ended September 30, 1997 and for the nine month
period of 1997, and the comparable periods in 1996, is set forth
below:
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
Pelican Sound 96.5-97.3% 93.3-94.9% 96.0-98.5% 91.5-99.0%
The Meadows II 84.0-93.1% 85.0-92.3% 83.0-93.1% 85.0-92.4%
Town Place 88.8-93.3% 94.9-96.5% 88.8-94.7% 86.5-96.5%
All Rental Units 91.5-93.7% 91.5-94.2% 91.5-93.7% 91.5-94.8%
Total rental expenses before depreciation and debt service in the
three month period ended September 30, 1997 decreased by $18,000,
from $908,000 to $890,000, compared to the same period of 1996.
The decrease was comprised of decreases at Pelican Sound ($34,000)
and at The Meadows II ($11,000), offset by an increase at Town
Place of $27,000.
For the nine month period total rental expense increased in the
1997 period by $17,000 from $2,675,000 to $2,692,000. This net
increase was comprised of an increase at Town Place of $45,000,
offset by decreases at the Meadows II of $22,000 and at Pelican
Sound of $6,000.
Net income from rental property operations before debt service and
depreciation was approximately $641,000 for the third quarter of
1997, compared to $620,000 for the comparative 1996 period, an
increase of approximately $21,000. The increase was comprised of
increases at Pelican Sound of $62,000, offset by a decrease at The
Meadows II of $1,000 and at Town Place of $40,000.
For the nine month period net income from rental operations before
depreciation and debt service was approximately $1,904,000 for the
1997 period compared to $1,826,000 for the comparable 1996 period,
an increase of $78,000. The increase was comprised of an increase
from Pelican Sound of $117,000, offset by decreases from The
Meadows II of $26,000 and Town Place of $13,000.
As a result of the foregoing, net operating income before
depreciation and debt service was $641,000 for the quarter compared
to $620,000 for the comparative quarter. For the quarter, Pelican
Sound contributed $334,000 (52%) of net operating income before
depreciation and debt service; The Meadows II contributed $176,000
(28%); and Town Place contributed $131,000 (20%).
As a result of the foregoing, the net operating income before
depreciation and debt service was $1,904,000 for the current nine
months compared to $1,826,000 for the comparative period. Pelican
Sound contributed $863,000 (45%), The Meadows II contributed
$560,000 (30%) and Town Place contributed $481,000 (25%).
Interest expense for the third quarter of 1997 increased $9,600
from the comparative period and increased $108,000 for the nine
month period. The increases were primarily the result of the
additional debt service incurred on the increased loan amount from
the refinancing of the mortgage on Town Place Apartments which
occurred in May 1996.
The net income before debt service from real estate activities is
partially sheltered by deductions for depreciation and amortization
which do not affect cash flow. Depreciation and amortization
increased $4,000 for the third quarter of 1997 compared to 1996,
and by $27,000 for the nine month period.
The Partnership's net other expenses for the third quarter
decreased $21,000 from the comparative period, but increased by
approximately $139,000 for the nine month period. Partnership
management expenses decreased $9,000 in the third quarter, but
increased $130,000 for the nine month period. There was a decrease
in interest income of $30,000 for the third quarter and $9,000 for
the nine month period. The increase in partnership management
expenses of $130,000 is primarily attributable to the litigation
expenses incurred in the lawsuit against Arnold K. Leas, Wellington
Management Corporation, and WMC Realty, Inc. and for costs incurred
for the proxy solicitation to adopt an amendment to Section 8 of
the Limited Partnership Agreement encaptioned the "Fair Price
Provision". The decrease in interest earned is primarily
attributable to a smaller investment portfolio in 1997 as a result
of using cash reserves to repurchase Limited Partner Interests in
1996.
As a result of the foregoing, the Partnership's net loss for the
quarter ended September 30, 1997 was $89,000, compared to a loss of
$76,000 in the same period of 1996. Exclusive of depreciation and
amortization, the Partnership's net income for the quarters ended
September 30, 1997 and 1996 was $200,000 and $210,000, and for the
nine month periods $413,000 for 1997 compared to $581,000 for 1996.
Liquidity and Sources of Capital
At September 30, 1997 there was approximately $2.7 million of cash
and cash equivalents and escrow deposits available to pay
liabilities. Current liabilities are approximately $4.1 million at
September 30, 1997, of which approximately $3 million is payable to
the General Partner and does not currently bear interest. The
payment of the entire amount of deferred fees and deferred interest
thereon would eliminate all unrestricted cash reserves of the
Partnership. While the deferred fees and related interest may be
paid in the near future, the actual timing of the payment 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.
During the first nine months of 1997, cash and cash equivalents
decreased by $349,000. During the period $501,000 was provided by
operating activities, $133,000 was used in investing activities
and $717,000 was used in financing activities that included
payments on the mortgage notes ($214,000) and distributions paid to
limited partners ($503,000) as shown herein on the Statements of
Cash Flows.
The Agreement of Limited Partnership provides that the Partnership
will make distributions for each calendar quarter of Cash Flow less
amounts set aside for Reserves. In July the Partnership paid to
the Limited Partners declarations of $167,500 ($12.50 per Interest)
and declared a similar amount payable for the third quarter of 1997
to be paid in October 1997. The distribution payable to the
General Partner of $3,000 was accrued and payment will be made in
the fourth quarter.
The Partnership intends, but is not required, to continue to make
cash distributions to the Limited Partners each quarter in the same
amount of $12.50 per Interest, even though there was a $130,000
increase in partnership expenses this year. The $130,000 increase
in partnership expenses is attributable to the litigation expenses
incurred in the lawsuit against Arnold K. Leas, Wellington
Management Corporation, and WMC Realty Inc. and the proxy
solicitation earlier this year. This placed an unusual demand on
cash reserves.
The outstanding principal balance on mortgage notes was reduced by
$214,000 during the three quarters. Scheduled mortgage debt
principal reductions are approximately $62,000 over the balance of
the year.
Partners' Capital decreased by $952,000 during the first nine
months of 1997 due to the net loss for financial reporting purposes
of $446,000 and cash distributions declared payable to the
partners of approximately $506,000.
In its ordinary course of operations, the Partnership has offered
its properties for sale. During the third quarter the Partnership
received and rejected four offers for Pelican Sound Apartments
averaging $15.0 million, ranging from a low offer of $14 million to
a high offer of approximately $16.1 million. An additional offer
of $15.3 million for Pelican Sound was received and rejected in
October. There are no current offers on either Town Place or The
Meadows II. The General Partner does not anticipate that any of
the properties will be sold during the remainder of 1997.
PART II.
OTHER INFORMATION
Item 1. Legal Proceeding.
There is no material pending litigation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The following exhibits are included herein:
(11) Statement re: computation of earnings per share
The Partnership did not file any reports on Form 8-K during the
three months ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DECADE COMPANIES INCOME PROPERTIES -
A LIMITED PARTNERSHIP
(Registrant)
By: DECADE COMPANIES
(General Partner)
Date: November 8, 1997 By:/s/ Jeffrey Keierleber
Jeffrey Keierleber
General Partner and Principal
Financial and Accounting Officer
of Registrant
Exhibit (11)-- Statement Re: Computation of Earnings Per Limited
Partner Interest
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
Primary and fully
diluted:
Average Limited
Partner
Interests
outstanding 13,400.27 17,466.31 13,400.27 17,466.31
Net (loss) ($88,556) ($74,888) ($441,528) ($248,121)
Per share
amount ($6.61) ($4.29) ($32.95) ($14.21)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 10
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,271,316
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,723,703
<PP&E> 31,236,872
<DEPRECIATION> 7,319,669
<TOTAL-ASSETS> 26,889,308
<CURRENT-LIABILITIES> 4,114,424
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (554,444)
<TOTAL-LIABILITY-AND-EQUITY> 27,443,752
<SALES> 1,530,957
<TOTAL-REVENUES> 1,564,595
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,202,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 451,251
<INCOME-PRETAX> (89,451)
<INCOME-CONTINUING> (89,451)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,451)
<EPS-PRIMARY> (6.61)
<EPS-DILUTED> (6.61)
</TABLE>
