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 June 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
June 30, 1997
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited as to
June 30, 1997 and the six months
then ended).
Balance Sheet at June 30, 1997. 3
Statements of Operations for the three months
and six months ended June 30, 1997 and 1996. 4
Statements of Partners' Capital
for the six months ended June 30, 1997
and the year ended December 31, 1996. 5
Statements of Cash Flows for the six months
ended June 30, 1997 and 1996. 6
Notes to Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEET
June 30, 1997
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,315,451
Escrow deposits 327,910
Prepaid expenses and other assets 108,516
Total Current Assets 2,751,877
INVESTMENT PROPERTIES, AT COST: 31,182,043
Less: accumulated depreciation (7,038,769)
Net Investment Property 24,143,274
OTHER ASSETS:
Utility deposits 43,415
Debt issue costs, net of accumulated
amortization 212,717
Total Other Assets 256,132
Total Assets $27,151,283
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and
accrued taxes $ 563,217
Tenant security deposits 161,162
Distributions payable 172,234
Accrued interest payable 37,333
Payables to affiliates 3,473,290
Mortgage notes payable 23,040,389
Total Liabilities 27,447,625
PARTNERS' CAPITAL:
General Partner Capital (80,366)
Limited Partners
(authorized--18,000 Interests;
outstanding--13,400.27 Interests) (215,976)
Total Partners' Capital (296,342)
Total Liabilities and
Partners' Capital $27,151,283
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
<S> <C> <C> <C> <C>
Operating revenue:
Rental income $ 1,529,291 $ 1,495,409 $3,064,826 $2,973,288
Operating expenses (707,115) (738,612) (1,445,608) (1,403,002)
Real estate taxes (176,941) (181,040) (356,036) (364,580)
Total operating
expenses (884,056) (919,652) (1,801,644) (1,767,582)
Net operating income 645,235 575,757 1,263,182 1,205,706
Interest expense (435,691) (373,829) (875,512) (776,989)
Depreciation (276,600) (272,500) (551,500) (542,300)
Amortization (8,734) (2,948) (17,469) (3,897)
Net income (loss) from
investment property (75,790) (73,520) (181,299) (117,480)
Other income (expenses):
Interest income 33,799 40,368 67,975 46,395
Partnership management (78,781) (53,540) (243,213) (103,898)
(44,982) (13,172) (175,238) (57,503)
NET (LOSS) $(120,772) $ (86,692) $(356,537) $ (174,983)
Net income (loss)
attributable to
General Partner(1%) $ (1,208) $ (867) $ (3,565) $ (1,750)
Net income (loss)
attributable to
Limited Partners (99%) (119,564) (85,825) (352,972) (173,233)
$(120,772) $ (86,692) $ (356,537) $ (174,983)
Net (loss) per Limited
Partner Interest $ (8.92) $ (4.91) $ (26.34) $ (9.92)
See Notes to Financial Statements
/TABLE
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited as to the Six Months Ended June 30, 1997)
General Limited
Partner Partners'
Capital Capital Total
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 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 (58) (58)
Distributions to Partners (2,000) (335,007) (337,007)
Net (loss) for the period (3,565) (352,972) (356,537)
BALANCES AT 6/30/97 $(80,366) $ (215,976) $ (296,342)
() denotes deficit or deduction.
See Notes to Financial Statements.
STATEMENTS OF CASH FLOWS - (UNAUDITED)
For The Six Months Ended June 30,
1997 1996
CASH PROVIDED BY OPERATIONS $ 253,526 $ 560,173
INVESTING ACTIVITIES:
Proceeds from exchange escrow account --- 267,287
Additions to investment property (78,840) (80,309)
Net cash provided by (used in) investing
activities (78,840) 186,978
FINANCING ACTIVITIES:
Proceeds from new mortgage loan --- 6,700,000
Principal payments on mortgage notes (144,592) (2,609,035)
Payment of tender offer costs (58) 0
Payment of debt issue costs --- (141,009)
Distributions paid to limited partners (335,008) (436,660)
Net cash provided by financing activities(479,658) 3,513,296
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (304,972) 4,260,447
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 2,620,423 56,316
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD $2,315,451 $4,316,763
Supplementary disclosure of cash flow information:
Interest paid $ 868,530 $ 755,404
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 six month period ended June 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 of Financial Condition and
Results of Operations.
Results of Operations
Operating revenue from rental income was $1,529,300 in the quarter ended
June 30, 1997, compared to $1,495,400 for the same period of 1996, an
increase of 2.3%. For the six month period ended June 30,1997 rental
income was $3,064,800 compared to $2,973,300 for the same period in
1996, an increase of 3.1%. Rental income was provided by the three sites
for the comparative three and six month periods set forth below:
Percent
For Three Months Ended Increase Increase
6/30/97 6/30/96 (Decrease) (Decrease)
Pelican Sound $ 663,400 $ 629,600 $ 33,800 5.4%
Meadows II 449,900 489,400 (39,500) (8.1%)
Town Place 416,000 376,400 39,600 10.5%
Total $1,529,300 $1,495,400 $ 33,900 2.3%
Percent
For Six Months Ended Increase Increase
6/30/97 6/30/96 (Decrease) (Decrease)
Pelican Sound $1,311,700 $1,228,400 $ 83,300 6.8%
Meadows II 933,800 970,800 (37,000) (3.8%)
Town Place 819,300 774,100 45,200 5.8%
Total $3,064,800 $2,973,300 $ 91,500 3.1%
The increased revenue at Pelican Sound and Town Place are attributable
to both rent increases and higher occupancy. The revenue decrease at
Meadows II is primarily attributable to lower occupancy which resulted
from increasing the asking rents.
The average monthly gross potential rent per unit at the Apartments for
the second quarter of 1997 and for the six month period of 1997, and the
comparative periods in 1996, is set forth below:
Number Three Months Ended Six Months Ended
of Units 6/30/97 6/30/96 6/30/97 6/30/96
Pelican Sound 379 $583 $566 $581 $565
The Meadows II 316 $577 $560 $574 $560
Town Place 240 $589 $574 $585 $572
All Rental Units 935 $582 $566 $580 $565
"Gross potential rent" represents the asking rent established by the
Partnership for a vacant apartment plus the rent in effect for occupied
apartments.
The average occupancy level at the Apartments for the second quarter
ended June 30, 1997 and for the six month period of 1997, and the
comparable periods in 1996, is set forth below:
Three Months Ended Six Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
Pelican Sound 98.3% 95.5% 97.4% 95.0%
The Meadows II 83.3% 90.6% 86.0% 90.9%
Town Place 93.6% 89.7% 93.7% 91.5%
All Rental Units 92.1% 92.3% 92.7% 92.7%
The range of occupancy levels at the Apartments for the second quarter
period ended June 30, 1997 and for the six month period of 1997, and the
comparable periods in 1996, is set forth below:
Three Months Ended Six Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
Pelican Sound 97.9-98.5% 95.0-96.4% 96.0-98.5% 91.5-99.0%
The Meadows II 83.0-83.8% 86.9-92.4% 83.0-90.6% 86.9-92.4%
Town Place 92.8-94.2% 86.5-91.3% 92.7-94.7% 91.2-93.7%
All Rental Units 91.6-92.4% 91.9-93.2% 91.6-93.4% 91.9-94.7%
Total rental expenses before depreciation and debt service in the three
month period ended June 30, 1997 decreased by $36,000, from $920,000 to
$884,000, compared to the same period of 1996. The decrease was
comprised of decreases at Town Place ($18,000) and Pelican Sound
($28,000), offset by an increase at Meadows II of $11,000.
For the six month period total rental expense increased in the 1997
period by $34,000 from $1,768,000 to $1,802,000. This increase was
comprised of increases at Town Place of $17,000 and at Pelican Sound of
$28,000, offset by a decrease at The Meadows II of $11,000.
Net income from rental property operations before debt service and
depreciation was approximately $645,000 for the second quarter of
1997, compared to $576,000 for the comparative 1996 period, an increase
of approximately $69,000. The increase was comprised of increases at
Pelican Sound ($25,000) and at Town Place of $45,000, offset by a
decrease at Meadows II of $1,000.
For the six month period net income from rental operations before
depreciation and debt service was approximately $1,263,000 for the 1997
period compared to $1,206,000 for the comparable 1996 period, an
increase of $57,000. The increase was comprised of increases from Town
Place of $27,000 and Pelican Sound of $55,000, offset by a decrease from
the Meadows II of $25,000.
As a result of the foregoing, net operating income before depreciation
and debt service was $645,000 for the quarter compared to $576,000 for
the comparative quarter. For the quarter, Pelican Sound contributed
$280,000 (43%) of net operating income before depreciation and debt
service; The Meadows contributed $174,000 (27%); and Town Place
contributed $191,000 (30%).
As a result of the foregoing, the net operating income before
depreciation and debt service was $1,263,000 for the current six months
compared to $1,206,000 for the comparative period. Pelican Sound
contributed $529,000 (39%), The Meadows II contributed $384,000 (34%)
and Town Place contributed $350,000 (27%).
Interest expense for the second quarter of 1997 increased $62,000 from
the comparative period and increased $99,000 for the six month period.
The increase was 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 increased $9,900 for the
second quarter of 1997 compared to 1996, and by $22,500 for the six
month period.
The Partnership's net other expenses increased in 1997 by approximately
$118,000. Partnership management expenses increased $139,000, offset by
an increase in interest income of $21,000. The increase in partnership
management expenses of $139,000 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 increase in interest earned is primarily attributable
to income from a larger investment portfolio arising from the
refinancing in May 1996 of the Town Place mortgage.
As a result of the foregoing, the Partnership's net loss for the quarter
ended June 30, 1997 was $121,000, compared to a loss of $87,000 in the
same period of 1996. Exclusive of depreciation and amortization, the
Partnership's net income for the quarters ended June 30, 1997 and 1996
was $165,000 and $189,000, and for the six month periods $212,000 for
1997 compared to $371,000 for 1996.
Liquidity and Sources of Capital
At June 30, 1997 there was $2.6 million of cash and cash equivalents and
escrow deposits available to pay liabilities. Current liabilities are
approximately $4.2 million at June 30, 1997, of which approximately $2.6
million is payable to the General Partner and does not currently bear
interest. The General Partner more likely than not will be paid the
entire amount of deferred fees and deferred interest thereon of $730,000
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.
During the first six months of 1997, cash and cash equivalents decreased
by $305,000. During the period $254,000 was provided by operating
activities, $79,000 was used in investing activities and approximately
$480,000 was used in financing activities that included payments on the
mortgage notes and distributions to partners as shown herein on the
Statements of Cash Flows.
Cash reserves were used to fund part of the cash distributions paid to
the Limited Partners of $335,000 during the six months of 1997. Usually
day-to-day operating expenses are funded from operations and do not
require the use of cash reserves. However, the litigation and proxy
solicitation during the first quarter required the need of operating
cash and cash reserves.
The Agreement of Limited Partnership provides that the Partnership will
make distributions for each calendar quarter of Cash Flow less amounts
set aside for Reserves. In April the Partnership paid to the Limited
Partners the March declaration of $167,500 ($12.50 per Interest) and
declared a similar amount payable for the second quarter of 1997 to be
paid in July 1997. The distribution payable to the General Partner of
$2,000 was accrued and payment will be made subsequently. The
Partnership intends, but is not required, to continue to make cash
distributions to the Limited Partners each quarter in the same amount.
The outstanding principal balance on mortgage notes was reduced by
$145,000 during the quarter. Scheduled mortgage debt principal
reductions are approximately $131,000 over the balance of the year.
Partners' Capital decreased by $694,000 during the first six months of
1997 due to the net loss for financial reporting purposes of
approximately $357,000 and cash distributions declared payable to the
partners of $337,000.
In its ordinary course of operations, the Partnership is negotiating to
sell Town Place Apartments for approximately $10.1 million. Tentative
closing would be scheduled to occur on or before January 15, 1998, but
in no event earlier than January 1, 1998. If the proposed transaction
is consummated, which is subject to numerous conditions, it is
anticipated that the transaction will be structured as a like-kind
exchange qualifying under Section 1031 of the Internal Revenue Code. As
of this date, the Partnership has not identified a "replacement
property" nor has any Agreement for Purchase and Sale of Town Place
Apartments, Clearwater, Florida been signed. These negotiations are
ongoing and an offer lapsed, without acceptance, on Monday, August 4,
1997. Since that date, there have been no further negotiations or
communications.
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 June 30, 1997.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DECADE COMPANIES INCOME PROPERTIES -
A LIMITED PARTNERSHIP
(Registrant)
By: DECADE COMPANIES
(General Partner)
Date: August 11, 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 Six Months Ended
June 30 June 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) ($119,564) ($85,825) ($352,972) $(173,233)
Per share
amount ($8.92) ($4.91) ($26.34) ($9.92)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE>
<MULTIPLIER>
<S>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,643,361
<SECURITIES>
<RECEIVABLES>
<ALLOWANCES>
<INVENTORY>
<CURRENT-ASSETS> 2,751,877
<PP&E> 31,182,043
<DEPRECIATION> 7,038,769
<TOTAL-ASSETS> 27,151,283
<CURRENT-LIABILITIES> 3,881,328
<BONDS>
<COMMON>
<OTHER-SE> (296,342)
<TOTAL-LIABILITY-AND-EQUITY> 27,151,283
<SALES> 1,529,291
<TOTAL-REVENUES> 1,563,090
<CGS>
<TOTAL-COSTS>
<OTHER-EXPENSES> 1,248,171
<LOSS-PROVISION>
<INTEREST-EXPENSE> 435,691
<INCOME-PRETAX> (120,772)
<INCOME-CONTINUING> (120,772)
<DISCONTINUED>
<EXTRAORDINARY>
<CHANGES>
<NET-INCOME> (120,772)
<EPS-PRIMARY> (8.92)
<EPS-DILUTED> (8.92)
</TABLE>
