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 March 31, 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)
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
March 31, 2000
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited as to
March 31, 2000 and the three months
then ended).
Balance Sheet at March 31, 2000. 3
Statements of Operations for the three months
ended March 31, 2000 and 1999. 4
Statements of Partners' Capital
for the three months ended March 31, 2000
and the year ended December 31, 1999. 5
Statements of Cash Flows for the three months
ended March 31, 2000 and 1999. 6
Notes to Financial Statements. 7
Item 2. Management's Discussion and Analysis or Plan of
Operation 7 - 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K. 14
SIGNATURES 14
Decade Companies Income Properties - A Limited PartnershipPART I. FINANCIAL
INFORMATION
Item 1. Financial Statements
BALANCE SHEET
March 31, 2000
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,654,560
Escrow deposits 16,440
Prepaid expenses and other assets 70,810
Total Current Assets 4,741,810
INVESTMENT PROPERTIES, AT COST: 32,425,138
Less: accumulated depreciation (9,918,029)
Net Investment Property 22,507,109
OTHER ASSETS:
Utility deposits 40,453
Debt issue costs, net of accumulated
amortization 609,931
Total Other Assets 650,384
Total Assets $27,899,303
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued taxes $ 389,150
Tenant security deposits 125,112
Distributions payable 172,479
Accrued interest payable 20,532
Payables to affiliates 3,933,764
Mortgage notes payable 25,767,530
Total Liabilities 30,408,567
PARTNERS' CAPITAL:
General Partner (92,886)
Limited Partners
(authorized--18,000 Interests;
outstanding--13,400.27 Interests) (2,416,378)
Total Partners' Capital (2,509,264)
Total Liabilities and
Partners' Capital $27,899,303
See Notes to Financial Statements.
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31
2000 1999
Operating revenue:
Rental income $1,655,566 $ 1,556,930
Operating expenses:
Operating 673,472 698,698
Real Estate Taxes 183,900 185,791
Total 857,372 884,489
Net income before
debt service and other
expenses 798,194 672,441
Interest expense (504,916) (444,249)
Depreciation (250,480) (246,150)
Amortization of debt issue costs (28,327) (13,150)
Net (loss) from investment property 14,471 (31,108)
Other income (expenses):
Interest income 41,849 17,473
Partnership management (65,684) (67,947)
(23,835) (50,474)
NET INCOME (LOSS) $ (9,364) $ (81,582)
Net income (loss) attributable to
General Partner (1%) $ (94) (816)
Net income (loss) attributable to
Limited Partners (99%) (9,270) (80,766)
$ (9,364) $ (81,582)
Net income (loss) per Limited
Partner Interest $ (0.69) $ (6.03)
See Notes to Financial Statements
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited as to the Three Months Ended March 31, 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 income for the period 268 26,541 26,809
BALANCES AT 12/31/99 $(91,792) $ (2,239,604) $(2,331,396)
Distributions to Partners (1,000) (167,504) (168,504)
Net (loss) for the period (94) (9,270) (9,364)
BALANCE AT 3/31/00 $(92,886) $ (2,416,378) $(2,509,264)
() denotes deficit, loss, or deduction.
See Notes to Financial Statements.
STATEMENTS OF CASH FLOWS - (UNAUDITED)
For The Three Months Ended March 31,
2000 1999
CASH PROVIDED BY OPERATIONS $ 420,677 $ 125,708
INVESTING ACTIVITIES:
Additions to investment property (78,984) (75,058)
FINANCING ACTIVITIES:
Principal payments on mortgage notes (90,284) (82,224)
Distributions paid to limited partners (167,504) (167,504)
NET CASH (USED IN) FINANCING ACTIVITIES (257,788) (249,728)
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS 83,905 (199,078)
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 4,570,655 1,867,814
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD $4,654,560 $1,668,736
Supplementary disclosure of cash flow information:
Interest paid $ 500,311 $ 437,222
Income taxes paid 0 0
See Notes to Financial Statements
Decade Companies Income Properties - A Limited Partnership
March 31, 1998Decade Companies Income Properties -
A Limited Partnership
Form 10-QSB
March 31, 2000NOTE 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 month period
ended March 31, 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 $1,655,000 in the quarter
ended March 31, 2000, compared to $1,557,000 for the same period in
1999, an increase of 6.3%. Rental income was provided by the three
sites for the comparative three month periods as follows:
Percent
Three Months Ended Increase Increase
3/31/00 3/31/99 (Decrease) (Decrease)
Pelican Sound $ 679,000 $ 654,000 $ 25,000 3.8%
Meadows II 546,000 519,000 27,000 5.2%
Town Place 430,000 384,000 46,000 12.0%
Total $1,655,000 $1,557,000 $ 98,000 6.3%
The $98,000 increase in rental income is attributed primarily to a
2% increase in gross potential rent and a 4% increase in occupancy
(from 88% to 92%). The $46,000 increase at Town Place is
attributed to a 2% increase in gross potential rent, plus a 7%
increase in average occupancy (from 86% to 93%). The $27,000
increase at The Meadows II is attributed to a 2% increase in gross
potential rent plus a 4% increase in average occupancy (from 88% to
92%). The $25,000 increase at Pelican Sound is attributed to a 2%
increase in gross potential rent, plus a 2% increase in occupancy
(from 89% to 91%).
The average monthly gross potential rent per unit at the Apartments
for the first quarter of 2000, and the comparative period in 1999
is set forth below:
Number
of Units 2000 1999
Pelican Sound 379 $644 $634
The Meadows II 316 $621 $609
Town Place 240 $634 $622
All Rental Units 935 $633 $622
"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 quarter ended
March 31, 2000, and the comparable period in 1999, is set forth
below:
Three Months Ended
3/31/00 3/31/99
Pelican Sound 91.1% 89.4%
The Meadows II 91.7% 88.4%
Town Place 93.4% 86.1%
All Rental Units 91.9% 88.2%
The range of occupancy levels at the Apartments for the three month
period ended March 31, 2000, and the comparable period in 1999, is
set forth below:
Three Months Ended
3/31/00 3/31/99
Pelican Sound 87.8-94.1% 88.5-90.5%
The Meadows II 91.0-92.4% 88.1-89.1%
Town Place 93.0-93.8% 85.6-86.8%
All Rental Units 90.4-93.4% 87.9-88.8%
Total rental expenses before depreciation and debt service in the
three month period ended March 31, 2000 decreased by $27,000, from
$884,000 to $857,000. The decrease was comprised of decreases from
Pelican Sound ($31,000), and Town Place ($4,000) offset by an
increase at Meadows II ($8,000).
A summary of operating expenses before depreciation and debt
service by apartment site follows:
Increase Increase
(Decrease) (Decrease)
2000 1999 Amount Percent
Pelican Sound $364,000 $395,000 $(31,000) (7.8%)
Meadows II 279,000 271,000 8,000 3.0%
Town Place 214,000 218,000 (4,000) (1.8%)
Total $857,000 $884,000 $(27,000) 3.1%
Pelican Sound realized approximately $20,000 savings from sewer and
water costs compared to the prior quarter. This is the result of
the installation last year of separate meters for each unit which
now passes these utility costs directly to each resident.
Net income from rental property operations before debt service and
depreciation was approximately $798,000 for the first three months
of 2000, compared to $672,000 for the comparative period, a
increase of approximately $126,000. The increase was comprised of
increases at Pelican Sound ($56,000), Town Place ($51,000), and at
The Meadows II ($19,000).
A summary of operating income before depreciation and debt service
by apartment site follows:
Increase Increase
(Decrease) (Decrease)
2000 1999 Amount Percent
Pelican Sound $315,000 $259,000 $ 56,000 21.6%
Meadows II 267,000 248,000 19,000 7.7%
Town Place 216,000 165,000 51,000 30.9%
Total $798,000 $672,000 $ 126,000 18.8%
Interest expense increased $61,000 from the comparative period
primarily as a result of an increased amount of debt incurred on
Pelican Sound Apartments since the comparative period.
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 $20,000 from 1999 to 2000 for the respective three month
periods.
The Partnership's net other expenses decreased in 2000 by
approximately $26,000. The decrease consists of a decrease in
partnership management expenses of $2,000, and an increase in
interest income of $24,000. The increase in interest earned is
primarily attributable to income earned from a larger investment
portfolio to generate such income.
As a result of the foregoing, the Partnership's net loss for the
quarter ended March 31, 2000 was $9,400, compared to a loss of
$81,600 in the same period of 1999. Exclusive of depreciation and
amortization, the Partnership's net income for the quarters ended
March 31, 2000 and 1999 was $269,000 and $178,000, respectively.
LIQUIDITY AND SOURCES OF CAPITAL
At March 31, 2000 there was $4.67 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 $4.61 million during the quarter.
During the first three months of 2000, cash and cash equivalents
increased by $84,000 as shown herein on the Statements of Cash
Flows. Operating activities provided $421,000 during the quarter.
The cash flow was used to make cash distributions to the limited
partners of $168,000, of which $42,000 (25.0%) 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 $90,000, and to purchase
capitalized additions to the investment properties of $79,000.
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 $4.2 million, consisting of $707,000
of current liabilities, $398,000 of mortgage principal liabilities,
and as described in detail below, $3,081,000 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 the partners. Investment
property operations generated a profit in the first quarter of 2000
of $293,000 (before depreciation and amortization of $279,000)
compared to $288,000 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 January the Partnership paid to
the Limited Partners the December declaration of $167,500 ($12.50
per Interest) and declared for the fourteenth consecutive quarter
a similar amount payable for the first quarter of 2000 to be paid
in April 2000. The distribution payable to the General Partner of
$1,000 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 March 31, 2000 the Partnership declared cash
distributions of approximately $13.4 million (74% of original
capital) to the Limited Partners since inception. Cumulative cash
distributions range from $733 (73%) to $880 (88%) 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. The Meadows II
loan is due in five years in 2005. The Pelican Sound note is due
in six years in 2006. 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 should be satisfied by cash generated from
operations. In the year 2003 the Town Place mortgage note
requires a balloon payment of approximately $6.0 million. The
Meadows II mortgage is due in year 2005 and requires a final
payment of approximately $5.7 million. It is anticipated that both
properties will be sold or refinanced prior to the maturity dates
in 2003 and 2005.
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 $178,000 during the first three
months of 2000 due to cash distributions declared payable to the
partners of $168,500, plus by the net loss for the quarter of
$9,300.
IMPACT OF YEAR 2000 COMPLIANCE
In prior years, the Partnership discussed the nature and progress
of its plan to become Year 2000 ready. In late 1999, the General
Partner completed its remediation and testing of systems. As a
result of those planning and 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 March 31, 2000.
Decade Companies Income Properties - A Limited Partnership
Form 10-QSB
March 31, 2000SIGNATURES
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: May 11, 2000 By:/s/ Jeffrey Keierleber
Jeffrey Keierleber
General Partner and Principal
Financial and Accounting Officer
of Registrant
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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