SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File Number 0-16848
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Virginia 54-1350850
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
One International Place, Boston, MA 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 330-8600
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
<PAGE>
PART I - FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
<TABLE>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Income
<S> <C> <C> <C> <C>
Rental $ 988,985 $ 987,522 $ 2,949,869 $ 2,937,126
Interest Income 1,760 6,115 8,287 13,325
Other Income 64,553 53,689 170,062 158,844
1,055,298 1,047,326 3,128,218 3,109,295
Expenses
Leasing 35,323 26,998 80,780 80,676
General and administrative 86,121 64,489 246,419 196,243
Management Fees 77,321 52,373 183,658 179,646
Utilities 99,865 88,356 320,838 267,448
Repairs and Maintenance 269,838 213,545 762,910 577,335
Insurance 46,489 45,296 118,174 133,713
Taxes 103,312 74,364 243,349 225,892
Total operating expenses 718,269 565,421 1,956,128 1,660,953
Other Expenses
Partnership Expenses 36,326 17,611 115,627 45,002
Interest Expense 190,599 193,719 576,481 582,017
Depreciation and amortization 242,199 205,930 719,613 620,840
Total expenses 1,187,393 982,681 3,367,849 2,908,812
Net income (loss) $ (132,095) $ 64,645 $ (239,631) $ 200,483
Net income (loss) allocated $ (1,320) $ 645 $ (2,396) $ 2,006
to General Partners
Net income (loss) allocated to $ (130,775) $ 54,948 $ (237,235) $ 170,410
Limited Partner Unit Holders
Net income (loss) allocated to $ 0 $ 9,050 $ 0 $ 28,067
Special Limited Partner
Net income (loss) allocated
to each unit $ (2.61) $ 1.10 $ (4.74) $ 3.41
</TABLE>
See Notes to Financial Statements
BALANCE SHEETS
<TABLE>
September 30, 1996 December 31, 1995
(Unaudited) (Audited)
ASSETS
Investment in rental property
<S> <C> <C>
Land $ 1,817,097 $ 1,817,097
Buildings and building improvements 18,561,107 18,561,107
Personal Property 4,246,665 4,002,496
24,624,869 24,380,700
Less Accumulated depreciation 10,918,958 10,242,795
13,705,911 14,137,905
Cash and cash equivalents 283,979 575,510
Tenant security deposits 132,206 149,198
Loan costs, net of accumulated amortization
of $300,347 and $256,897 3,800 47,250
Other assets 933,456 699,521
1,353,441 1,471,479
$ 15,059,352 $ 15,609,384
LIABILITIES AND PARTNERS' CAPITAL
Liabilities Applicable to investment
in rental property
Mortgages payable $ 8,030,156 $ 8,069,734
Other liabilities
Accounts Payable 81,439 257,410
Accrued interest payable 64,127 66,020
Tenant security deposits 130,372 135,350
Other liabilities 304,163 240,659
Total Liabilities 8,610,257 8,769,173
Partner's Capital
Limited Partners' unit holders' 50,000 Units
authorized and outstanding 6,952,813 7,340,048
Special Limited Partner (464,930) (463,460)
General Partner (38,788) (36,377)
Total Partners' Capital 6,449,095 6,840,211
Total Liabilities and Partners' Capital $ 15,059,352 $ 15,609,384
</TABLE>
See Notes to Financial Statements
STATEMENTS OF CASH FLOWS
<TABLE>
For the Nine Months Ended
September 30, 1996 and 1995 (Unaudited) 1996 1995
Cash Flow from operating activities:
<S> <C> <C>
Net income (loss) $ (239,631) $ 200,483
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 719,613 620,840
Changes in assets and liabilities:
Decrease (increase) in security deposits cash 16,992 (7,654)
Increase in other assets (233,935) (146,462)
Decrease in accounts payable (175,971) (6,698)
Decrease in tenant security deposits (4,978) (13,997)
Increase in other liabilities 61,611 7,882
Net cash provided by operating activities 143,701 654,394
Cash flow from investing activities:
Additions to buildings and improvements (244,169) (208,012)
Net cash used in investing activities (244,169) (208,012)
Cash flow from financing activities:
Principal Payments on mortgage note (39,578) (35,933)
Cash distributions paid to partners (151,485) (151,515)
Net cash used in financing activities (191,063) (187,448)
Net increase (decrease) in cash and cash equivalents (291,531) 258,934
Cash and cash equivalents, beginning of period 575,510 248,928
Cash and cash equivalents, end of period $ 283,979 $ 507,862
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 578,404 $ 582,017
</TABLE>
See Notes to Financial Statements
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
Units of
For the Nine Months Ended Limited Special Limited
September 30, 1996 and September 30, 1995 Partnership General Limited Partner/ Total
(Unaudited) Interest Partner Partner Unit Holder Capital
<S> <C> <C> <C> <C> <C>
Balance , December 31, 1994 50,000 $ (39,023) $ (497,906) $ 7,412,475 $ 6,875,546
Net Income - 2,006 28,067 170,410 200,483
Distributions - - (1,515) (150,000) (151,515)
Balance, September 30, 1995 50,000 $ (37,017) $ (471,354) $ 7,432,885 $ 6,924,514
Balance, December 31, 1995 50,000 $ (36,377) $ (463,460) $ 7,340,048 $ 6,840,211
Net loss (2,396) - (237,235) (239,631)
Distributions (15) (1,470) (150,000) (151,485)
Balance, September 30, 1996 50,000 $ (38,788) $ (464,930) $ 6,952,813 $ 6,449,095
</TABLE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
1. ACCOUNTING AND FINANCIAL REPORT POLICIES
The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. The Registrant's accounting and
financial reporting policies are in conformity with generally accepted
accounting principles and include adjustments in interim periods considered
necessary for a fair presentation of the results of operations. Certain
information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Registrant's latest annual report on Form 10-K.
The accompanying consolidated financial statements reflect the Partnership's
results of operations for an interim period and are not necessarily indicative
of the results of operations for the year ending December 31, 1996.
2. TAXABLE INCOME
The Partnership's results of operations on a tax basis are expected to differ
from the net income for financial reporting purposes primarily due to the
accounting differences in the recognition of depreciation and amortization.
3. RELATED PARTY TRANSACTIONS
Property management and asset management fees paid or accrued by the Partnership
to affiliates of the General Partners, totaled $58,535 and $52,373 during the
nine months ended September 30, 1996 and 1995, respectively. On March 15, 1996
the Partnership terminated Winthrop Management as the managing agent effective
March 18, 1996 and appointed an unaffiliated third party to assume management of
the properties.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANAYSIS OR PLAN OF OPERATION
Liquidity and Capital Resources
The Partnership receives rental income from its properties and is responsible
for operating expenses, administrative expenses, capital improvements and debt
service payments. The Partnership's properties are leased to tenants who are
subject to leases of up to one year.
During the nine months ended September 30, 1996, rental revenue and other income
from the properties, along with interest income from the Partnership's
short-term investments, was insufficient to cover: (i) all operating expenses
and debt service of the properties and all administrative expenses of the
Partnership; and (ii) all capital improvements made to the properties during
1996. As a result, as of September 30, 1996, the Partnership's unrestricted cash
balance had decreased to $283,979 from $575,510 at December 31, 1995. The
decrease was due to the $244,169 of net cash used in investing activities and
the $191,063 used in financing activities which was partially offset by $143,701
provided by operating activities.
It is expected that future rental revenue and other income from the
Partnership's properties will be sufficient to cover all administrative expenses
of the Partnership and all operating expenses and debt service of the
properties. The Partnership intends to continue to limit cash distributions to
fund the capital improvement program. However, the performance of the
Partnership's properties and its distribution policy will continue to be
reviewed on a quarterly basis.
In addition, the ability of the Partnership's properties to improve operations
may affect the liquidity of the Partnership. Inflation and changing economic
conditions in the future could affect vacancy levels, rental payment defaults
and operating expenses of the Partnership's revenue, net income and liquidity.
The markets in which the properties are located, which had softened as a result
of general economic conditions and difficulties in the real estate industry,
have stabilized, and in some instances have started to show signs of recovery.
In general, the age of the properties and the fact that capital improvements and
ordinary maintenance were deferred by prior management had reduced the
properties' competitiveness within their markets. In 1992, the Partnership
commenced a capital improvement program at each of the properties, which was
estimated cost approximately $1.5 to $2.0 million over an approximately
four-year period. From 1992 through 1995, the Partnership spent approximately
$1,885,000 on capital improvements.
With respect to the capital improvement program, the Partnership has spent
$244,169 for the nine months ending September 30, 1996. The Partnership has
budgeted an additional $400,000 for capital improvements during the remainder of
1996 which would include additional exterior painting and repairs at
Forestbrook, exterior paintings and repairs at Sterlingwood, balcony and
exterior siding repairs at Seasons Chase, and paving repairs and carpet and
appliance replacement at all four properties. At two of the Partnership's four
properties (Forestbrook and Sterlingwood Apartments) a portion of the capital
improvement program is funded by replacement reserves held by the mortgage
lenders, with the balance being funded by from operations. The balance of these
replacement reserves was $519,554 at September 30, 1996. Capital improvements at
the remaining two properties (Pelham Ridge and Seasons Chase Apartments) are
funded from operations.
<PAGE>
RESULTS OF OPERATIONS
The Partnership generated a net loss for the nine months ended September 30,
1996 of $239,631, as compared to net income of $200,483 for the nine months
September 30, 1995. The net loss for the three months ended September 30, 1996
was $132,095 as compared to net income of $64,645 for the three months ended
September 30, 1995. Total income increased slightly as a result of a 1% increase
in rental income and other income for the first nine months of 1996, as compared
to the first nine months of 1995, which was substantially offset by a decrease
in interest income. Average rents at the properties have increased 6.7% since
the first nine months of 1995, while average occupancy has decreased from 94% to
89%. Sterlingwood experienced a slight increase in occupancy from 92% to 93% due
to new leasing personnel and strong marketing programs. Decreases in occupancy
have been significant at Forestbrook from 94% to 89%, Pelham Ridge from 95% to
86%, and Seasons Chase from 94% to 89%. Unfortunately, all three properties had
many non-renewals due to the rental increases and unqualified applicants. Pelham
Ridge requires exterior work done to the property. The buildings need to be
painted and the pool/clubhouse is in state of disrepair. A fire in September
1995 has left Seasons Chase with 13 units down. These units just became ready
for rent during the second quarter of 1996.
Direct operating costs of the Partnership's properties increased from $1,660,953
to $1,956,128 or approximately 17.8% compared to the first nine months of 1995.
The increase was primarily the result of increased utility costs of $53,390 and
repairs and maintenance expenses of $186,000 as well as higher general and
administrative charges of $50,176. The higher utility costs were the result of
increased water and gas charges primarily at Seasons Chase. The repairs and
maintenance increase was a result of the increased maintenance payroll expenses
and higher maintenance supply charges. The increased general and administrative
charges resulted primary as a result of increased payroll and legal eviction
charges. The remaining operating costs were maintained at the same level as in
the prior year. Debt service, interest and amortization expenses remained
stable, while depreciation expenses of the Partnership increased as a result of
capital spending in 1996.
The results of operations in future periods may differ from those for the nine
months ended September, 1996, due to inflation and changing economic conditions
which could affect vacancy levels, rental rates, and operating expenses.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed the three months ended
September 30, 1996.
<PAGE>
SIGNATURE
Pursuant to 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.
SOUTHEASTERN INCOME PROPERITES
LIMITED PARTNERSHIP
By: Winthrop Southeastern Properties, Inc.
Its General Partner
By: Eight Winthrop Properties, Inc.
Its General Partner
Date: November 14, 1996
By: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
Date: November 14, 1996
By: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
nine month period ending September 30, 1996 and is
qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000802969
<NAME> SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 283,979
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,349,641
<PP&E> 24,624,869
<DEPRECIATION> (10,918,958)
<TOTAL-ASSETS> 15,059,352
<CURRENT-LIABILITIES> 580,101
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 6,449,095
<TOTAL-LIABILITY-AND-EQUITY> 15,059,352
<SALES> 0
<TOTAL-REVENUES> 3,128,218
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,791,368
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 576,481
<INCOME-PRETAX> (239,631)
<INCOME-TAX> 0
<INCOME-CONTINUING> (239,631)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239,631)
<EPS-PRIMARY> (4.74)
<EPS-DILUTED> (4.74)
</TABLE>
