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, 2000.
[ ] 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)
(262) 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, 2000
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited as to
June 30, 2000 and the three months and six months
then ended).
Balance Sheet at June 30, 2000. 3
Statements of Operations for the three
months and six months ended June 30, 2000
and 1999 4
Statements of Partners' Capital
for the six months ended June 30, 2000
and the year ended December 31, 1999. 5
Statements of Cash Flows for the six months
ended June 30, 2000 and 1999. 6
Notes to Financial Statements. 7
Item 2. Management's Discussion and Analysis or Plan
of Operations 7 - 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K. 16
SIGNATURES 17
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEET
June 30, 2000
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,680,569
Escrow deposits 16,394
Prepaid expenses and other assets 39,447
Total Current Assets 4,736,410
INVESTMENT PROPERTIES, AT COST: 32,562,235
Less: accumulated depreciation (10,173,149)
Net Investment Property 22,389,086
OTHER ASSETS:
Utility deposits 40,453
Debt issue costs, net of accumulated
amortization 581,605
Total Other Assets 622,058
Total Assets $27,747,554
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and
accrued taxes $ 564,142
Tenant security deposits 127,244
Distributions payable 169,504
Accrued interest payable 20,462
Payables to affiliates 3,928,832
Mortgage notes payable 25,673,004
Total Liabilities 30,483,188
PARTNERS' CAPITAL:
General Partner Capital (94,464)
Limited Partners
(authorized--18,000 Interests;
outstanding--13,400.27 Interests) (2,641,170)
Total Partners' Capital (2,735,634)
Total Liabilities and
Partners' Capital $27,747,554
See Notes to Unaudited Financial Statements.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
6/30/00 6/30/99 6/30/00 6/30/99
Operating revenue:
Rental income $ 1,712,999 $1,608,497 $3,368,565 $3,165,427
Operating expenses (813,376) (658,259) 1,486,848) (1,356,957)
Real estate taxes (183,900) (187,792) (367,800) (373,583)
Total operating
expenses (997,276) (846,051) (1,854,648) (1,730,540)
Net operating income 715,723 762,446 1,513,917 1,434,887
Interest expense (505,712) (447,733) (1,010,628) (891,982)
Depreciation (255,120) (250,200) (505,600) (496,350)
Amortization (28,326) (13,150) (56,653) (26,300)
Net income (loss) from
investment property (73,435) 51,363 (58,964) 20,255
Other income (expenses):
Interest income 68,250 22,629 110,099 40,102
Partnership managmnt (52,681) (65,921) (118,365) (133,868)
15,569 (43,292) (8,266) (93,766)
NET INCOME (LOSS) $(57,866)$ 8,071 $ (67,230) $ (73,511)
Net income (loss)
attributable to General
Partner(1%) $ (579)$ 81 $ (672) $ (735)
Net income (loss)
attributable to Limited
Partners (99%) (57,287) 7,990 (66,558) (72,776)
$ (57,866) $ 8,071 $ (67,230) $ (73,511)
Net income (loss) per Limited
Partner Interest $ (4.28) $ 0.60 $ (5.02) $ (5.43)
See Notes to Unaudited Financial Statements
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited as to the Six Months Ended June 30, 2000)
General Limited
Partner Partners'
Capital Capital Total
BALANCES AT 12/31/98 $(88,085) $(1,596,126) $ (1,684,211)
Distributions to Partners (3,975) (670,019) (673,994)
Net (loss) for the year 268 26,541 26,809
BALANCES AT 12/31/99 $(91,792) $(2,239,604) $(2,331,396)
Distributions to Partners (2,000) (335,008) (337,008)
Net income for the period (672) (66,558) (67,230)
BALANCES AT 6/30/00 $(94,464) (2,641,170) $(2,735,634)
() denotes deficit or deduction.
See Notes to Unaudited Financial Statements.
STATEMENTS OD CASH FLOWS-(UNAUDITED)
For The Six Months Ended June 30,
2000 1999
CASH PROVIDED BY (USED FOR) OPERATIONS $ 849,787 $ 572,700
INVESTING ACTIVITIES:
Additions to investment property (216,080) (207,961)
FINANCING ACTIVITIES:
Principal payments on mortgage notes (184,810) (155,024)
Distributions paid to limited partners (335,008) (335,008)
Distributions paid to general partner (3,975) 0
NET CASH (USED IN) FINANCING ACTIVITIES (523,793) (490,032)
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS 109,914 (125,293)
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 4,570,655 1,867,814
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD $4,680,569 $1,742,521
Supplementary disclosure of cash flow information:
Interest paid $ 996,379 $ 917,546
Income taxes paid 0 0
See Notes to Unaudited 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
periods ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000.
For further information, refer to the financial statements and
footnotes thereto included in the Partnership's annual report on
Form 10-KSB for the year ended December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING INFORMATION
Forward-looking statements in this report, including without
limitation, statements relating to Decade Companies Income
Properties (the "Partnership") plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such
forwarded-looking statements involve risks and uncertainties
including without limitation the following: (i) the Partnership's
plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of the General
Partner; (ii) the Partnership's plans and results of operations
will be affected by the Partnership's ability to manage its growth
(iii) other risks and uncertainties indicated from time to time in
the Partnership's filings with the Securities and Exchange
Commission.
Information contained in this Quarterly Report on Form 10-QSB
contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be
identified by the use of forward-looking terminology such as "may,"
"will," "expect, "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable
terminology. There are number of important factors with respect to
such forward looking statements, including certain risks and
uncertainties, that could cause actual results to differ materially
from those contemplated in such forward-looking statements. Such
factors, which could adversely effect the Partnership's ability to
obtain these results, include, among other things, (i) the volume
of transactions and prices for real estate in the real estate
markets generally, (ii) a general or regional economic downturn
which could create a recession in the real estate markets, (iii)
the Partnership's debt level and its ability to make interest and
principal payments, (iv) an increase in expenses related to new
initiatives, investments in people and technology, and service
improvements, (v) the success of the new initiatives and
investments and (vi) other factors described elsewhere in this
Quarterly Report on Form 10-QSB.
RESULTS OF OPERATIONS
Operating revenue from rental income was $1,713,000 in the quarter
ended June 30, 2000, compared to $1,608,000 for the same period in
1999, an increase of 6.5%. Rental income was provided by the
three sites for the comparative three month period as set forth
below:
Percent
Three Months Ended Increase Increase
6/30/00 6/30/99 (Decrease) (Decrease)
Pelican Sound $ 721,000 $ 705,000 $ 16,000 2.3%
Meadows II 535,000 495,000 40,000 8.1%
Town Place 457,000 408,000 49,000 12.0%
Total $1,713,000 $1,608,000 $ 105,000 6.5%
The $105,000 increase in rental income for the second quarter,
compared to the prior year's second quarter, is attributed
primarily to both a 2% increase in gross potential rent and a 3%
increase in occupancy (from 90% to 93%). The $105,000 increase
consisted of increases at Town Place of $49,000, Meadows II of
$40,000 and Pelican Sound of $16,000. The $49,000 increase at Town
Place is attributed to a 3% increase in gross potential rent, plus
a 2% increase in average occupancy (from 93% to 95%). The $40,000
increase at The Meadows II is attributed to a 2% increase in gross
potential rent plus a 6% increase in average occupancy (from 84% to
90%). The $16,000 increase at Pelican Sound is attributed to a 2%
increase in gross potential rent, offset by a slight decrease in
occupancy.
Operating revenue from rental income for the six month period ended
June 30, 2000 was $3,369,000, compared to $3,165,000 for the same
period in 1999, an increase of 6.4%. Rental income was provided by
the three sites for the comparative six month periods as set forth
below.
Percent
For Six Months Ended Increase Increase
6/30/00 6/30/99 (Decrease) (Decrease)
Pelican Sound $1,400,000 $1,359,000 $ 41,000 3.0%
Meadows II 1,082,000 1,014,000 68,000 6.7%
Town Place 887,000 792,000 95,000 12.0%
Total $3,369,000 $3,165,000 $ 204,000 6.4%
The $204,000 increase in rental income for the six month period,
compared to the prior year's same six month period, is attributed
to both a 2% increase in gross potential rent and a 3% increase in
occupancy (from 89% to 92%). The $204,000 increase consisted of
increases at all three apartment sites: Town Place ($95,000),
Meadows II ($68,000), and Pelican Sound ($41,000). The $95,000
increase at Town Place is attributed to a 2% increase in gross
potential rent, plus a 4% increase in average occupancy (from 90%
to 94%). The $68,000 increase at The Meadows II is attributed to
a 2% increase in gross potential rent, plus a 5% increase in
average occupancy (from 86% to 91%). The $41,000 increase at
Pelican Sound is attributed to a 2% increase in gross potential
rent, plus a slight increase in occupancy (from 91.6% to 92.2%).
The average monthly gross potential rent per unit at the Apartments
for the second quarter of 2000 and for the six month period of
2000, and the comparative periods in 1999, is set forth below:
Number Three Months Ended Six Months Ended
of Units 6/30/00 6/30/99 6/30/00 6/30/99
Pelican Sound 379 $650 $635 $647 $634
The Meadows II 316 $623 $612 $622 $611
Town Place 240 $640 $621 $637 $622
All Rental Units 935 $638 $623 $636 $623
"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, 2000 and for the six month period of 2000,
and the comparable periods in 1999, is set forth below:
Three Months Ended Six Months Ended
6/30/00 6/30/99 6/30/00 6/30/99
Pelican Sound 93.3% 93.9% 92.2% 91.6%
The Meadows II 90.3% 84.0% 91.0% 86.2%
Town Place 94.9% 93.0% 94.2% 89.6%
All Rental Units 92.7% 90.4% 92.3% 89.3%
The range of occupancy levels at the Apartments for the second
quarter period ended June 30, 2000 and for the six month period of
2000, and the comparable periods in 1999, is set forth below:
Three Months Ended Six Months Ended
6/30/00 6/30/99 6/30/00 6/30/99
Pelican Sound 91.8-95.7% 93.4-94.2% 87.8-95.7% 88.5-94.2%
The Meadows II 88.3-92.4% 79.0-87.4% 88.3-92.4% 79.0-89.1%
Town Place 93.5-96.7% 92.8-93.3% 93.0-96.7% 85.6-93.3%
All Rental Units 91.3-93.6% 88.6-91.6% 90.4-93.6% 87.9-91.6%
Total rental expenses before depreciation and debt service in the
three month period ended June 30, 2000 increased by $151,000, from
$846,000 to $997,000, compared to the same period of 1999. The
increase was comprised of increases at Pelican Sound of $94,000, at
Town Place of $38,000 and Meadows II of $19,000.
For the six month period total rental expenses increased by
$125,000 from $1,730,000 to $1,855,000. The increases were
comprised of increases at Pelican Sound of $64,000, and at Town
Place of $33,000, and at The Meadows II of $28,000.
A summary of operating expenses before depreciation and debt
service by apartment site follows:
For the Three Months Ended
Increase Increase
(Decrease) (Decrease)
6/30/00 6/30/99 Amount Percent
Pelican Sound $430,000 $336,000 $ 94,000 28.0%
Meadows II 293,000 274,000 19,000 6.9%
Town Place 274,000 236,000 38,000 16.1%
Total $997,000 $846,000 $151,000 17.8%
For The Six Months Ended
Increase Increase
(Decrease) (Decrease)
6/30/00 6/30/99 Amount Percent
Pelican Sound $ 795,000 $ 731,000 $ 64,000 8.8%
Meadows II 573,000 545,000 28,000 5.1%
Town Place 487,000 454,000 33,000 7.3%
Total $1,855,000 $1,730,000 $125,000 7.2%
The operating expense increases at Pelican Sound are primarily
attributable to the
repair of balconies and exterior painting. The increases at Town
Place are also primarily attributable to exterior painting and
repair. The increases at The Meadows II are primarily attributable
to increases in various expense categories, including outside
contractor cleaning and painting, and on-site personnel costs for
grounds, snow removal, apartment cleaning and maintenance.
Net income from rental property operations before debt service,
depreciation and amortization, was approximately $716,000 for the
second quarter of 2000, compared to $762,000 for the comparative
period, a decrease of approximately $46,000. The net decrease was
comprised of a decrease at Pelican Sound of $78,000, offset by
increases at The Meadows II of $21,000 and at Town Place of
$11,000.
For the six month period net income from rental operations before
depreciation, amortization, and debt service was approximately
$1,514,000 for the 2000 period compared to $1,435,000 for the
comparable 1999 period, an increase of $79,000. The increase was
comprised of increases at Town Place of $62,000, and the Meadows II
of $40,000, offset by a decrease at Pelican Sound of $23,000.
As a result of the foregoing, a summary of net operating income
before depreciation, amortization, and debt service, by site
including the percent of total for each site for three month
periods ended follows:
Increase Increase
6/30/00 6/30/99 (Decrease)(Decrease)
Amount Percent Amount Percent Amount Percent
Pelican Sound $290,000 40% $368,000 48% $(78,000) (21.2%)
Meadows II 242,000 34% 221,000 29% 21,000 9.5%
Town Place 184,000 26% 173,000 23% 11,000 6.4%
Total $716,000 100% $762,000 100% $(46,000) (6.0%)
A summary of net operating income
before depreciation, amortization, and debt service, by site for
the six month periods ended follows:
Increase Increase
6/30/00 6/30/99 (Decrease) (Decrease)
Amount Percent Amount Percent Amount Percent
Pelican Sound $ 605,000 40% $ 628,000 44% $(23,000) (3.7%)
Meadows II 509,000 34% 469,000 33% 40,000 8.5%
Town Place 400,000 26% 338,000 23% 62,000 18.3%
Total $1,514,000 100% $1,435,000 100% $ 79,000 5.5%
Interest expense for the second quarter of 2000 increased $58,000
from the comparative period and increased $119,000 for the six
month period, primarily as a result of a higher amount of
outstanding debt attributable to the mortgage refinancing of
Pelican Sound Apartments in October 1999.
The net income before debt service from real estate activities is
reduced by deductions for depreciation and amortization which do
not affect cash flow. Depreciation and amortization increased
$20,000 for the second quarter of 2000 compared to 1999, and by
$40,000 for the six month period.
The Partnership's net other expenses decreased during the six month
period in 2000 by approximately $85,000. The $85,000 decrease
consisted of an increase in interest income of $70,000 and a
decrease in partnership management expenses of $15,000. The
increased interest income is attributable to a larger investment
portfolio available to generate such income.
As a result of the foregoing, the Partnership's net loss for the
quarter ended June 30, 2000 was $58,000, compared to a profit of
$8,000 in the same period of 1999. For the six month periods the
Partnership's net loss for 2000 was $67,000, compared to net loss
of $74,000 for 1999.
Exclusive of depreciation and amortization, the Partnership's net
income for the quarters ended June 30, 2000 and 1999 was $226,000
and $271,000, and for the six month periods the net income
exclusive of depreciation and amortization was $495,000 of 2000 and
$449,000 for 1999.
LIQUIDITY AND SOURCES OF CAPITAL
At June 30, 2000 there was $4.70 million of cash and cash
equivalents and escrow deposits available to pay liabilities. The
Partnership has a credit line established of approximately $2.56
million from the undisbursed funds from The Meadows II refinancing
to provide additional liquidity. The undisbursed funds do not bear
interest until they are released by the mortgage lender. The cash
balance averaged $4.63 million during the six month period.
During the first six months of 2000, cash and cash equivalents
increased by $110,000 as shown herein on the Statements of Cash
Flows. Operating activities provided $850,000 during the quarter.
The cash flow was used to make cash distributions to the partners
of $339,000 ($335,000 to the limited partners, and $4,000 to the
general partner). Approximately $110,000 (32.0% of the cash
distributions) was considered to be portfolio income subject to
income taxes. The balance of the cash flow provided by operations
was used to make principal payments on the outstanding mortgage
notes of $185,000, to purchase capitalized additions to the
investment properties of $216,000, and to increase cash reserves.
The General Partner believes that the Partnership has the ability
to generate adequate amounts of cash to meet the Partnership's
current needs.
Short-term obligations total $4.4 million, consisting of $881,000
of current liabilities, $406,000 of mortgage principal liabilities,
and as described in detail below, $3,069,000 payable to the General
Partner and affiliates.
On a short-term basis, rental operations are expected to provide a
stream of cash flow to pay day-to-day operating expenses and to
fund quarterly cash distributions to partners. Investment
property operations generated a profit in the second quarter of
2000 of $226,000 (before depreciation and amortization of $283,000)
compared to $271,000 for the same period in 1999.
For the six month period net income from investment properties
generated a profit of $495,000 for year 2000 (before depreciation
and amortization of $562,000) compared to $449,000 for the same
period in 1999.
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 for the fifteenth consecutive quarter a
similar amount payable for the second quarter of 2000 to be paid in
July 2000. 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 of 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 in
the next 12 months, which should be met from operations and cash
reserves. Through June 30, 2000 the Partnership declared cash
distributions of approximately $13.5 million (75% of original
capital) to the Limited Partners since inception. Cumulative cash
distributions range from $745 (74%) to $892 (89%) per $1,000
Interest of an original holder, depending upon the date of
purchasing the Interest.
The Town Place loan is due in three years in 2003 and will require
a balloon payment of approximately $6.0 million. The Meadows II
loan is due in five years in 2005 and will require a balloon
payment of approximately $5.7 million. The Pelican Sound note is
due in six years in 2006 and will require a balloon payment of
approximately $6.0 million. The long-term mortgage obligations of
the Partnership require principal reductions (excluding balloon
payments) of approximately $2.1 million over the next five years.
These obligations will most likely be satisfied by cash generated
from operations. It is anticipated that all three properties will
be sold or refinanced prior to the maturity dates.
The mortgage notes on Pelican Sound, Town Place and Meadows II bear
interest at 7.50%, 8.25%, and 7.25% respectively. The Partnership
is exploring the possibility of refinancing the Town Place mortgage
loan during 2000 if lower interest rates are available. Additional
proceeds from the refinancing in excess of the existing mortgage
debt would provide additional liquidity.
Approximately $3.9 million of deferred fees and deferred interest
related thereto has been earned by the General Partner and
affiliates, of which approximately $3.0 million is a short term
obligation of the Partnership currently due and payable. To date
the Partnership has not paid the $3.0 million of deferred fees and
deferred interest in order to preserve the ability of the
Partnership to acquire additional properties, if deemed advisable.
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. The General
Partner currently intends to make payment only after it is
determined that the liquidity is not required to purchase
additional properties, either directly or by means of an exchange.
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.
Partners' Capital decreased by $404,000 during the first six months
of 2000 due to cash distributions declared payable to the partners
of $337,000, plus by the net loss for the second quarter of
$67,000.
IMPACT OF YEAR 2000 COMPLIANCE
As a result of its implementation efforts, the
Partnership experienced no significant disruptions in mission
critical information technology and non-information technology
systems and believes those systems successfully responded to the
Year 2000 date change. The Partnership is not aware of any
material problems resulting from Year 2000 issues, either with its
internal systems, or the products and services of third parties.
The Partnership will continue to monitor its mission critical
computer applications and those of its suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000
matters that may arise are addressed promptly.
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 exhibit is included herein:
(27) Financial Data Schedule
The Partnership did not file any reports on Form 8-K during the
three months ended June 30, 2000.
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 8, 2000 By: /s/ Jeffrey Keierleber
Jeffrey Keierleber
General Partner and Principal
Financial and Accounting Officer
of Registrant
