SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996 Commission File Number n-nnnnn
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
<TABLE>
BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------------------
March 31, December 31,
1996 1995
(Unaudited) (Audited)
- -------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investment in rental property
Land $ 1,817,097 $ 1,817,097
Buildings and building improvements 18,561,107 18,561,107
Personal property 4,074,505 4,002,496
------------ ------------
24,452,709 24,380,700
Less accumulated depreciation 10,461,478 10,242,795
------------ ------------
13,991,231 14,137,905
Cash 137,713 575,510
Tenant security deposits 175,231 149,198
Loan costs, net of accumulated amortization
of $267,760 and $256,897 36,387 47,250
Other assets 748,180 699,521
------------ ------------
1,097,511 1,471,479
------------ ------------
$ 15,088,742 $ 15,609,384
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities applicable to investment in rental property
Mortgages payable $ 8,056,871 $ 8,069,734
Other liabilities
Accounts payable 60,325 257,410
Accrued interest payable 66,020 66,020
Rents received in advance 10,580 18,339
Tenant security deposits 135,733 135,350
Other liabilities 181,887 222,320
----------- ---------
Total liabilities 8,511,416 8,769,173
Partners' Capital
Limited Partners unit holders' 50,000 Units
authorized and outstanding 7,116,581 7,340,048
Special Limited Partner (500,260) (463,460)
General Partner (38,995) (36,377)
----------- -----------
Total Partners' Capital 6,577,326 6,840,211
----------- ----------
Total liabilities and partners' capital $15,088,742 15,609,384
=========== ==========
See notes to Financial Statements.
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
<TABLE>
STATEMENTS OF OPERATIONS
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Three Months Ended March 31, 1996 and 1995
(Unaudited) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income
Rental $ 966,510 $ 957,162
Interest income 5,242 1, 529
Other income 51,258 54,210
----------- -----------
1,023,010 1,012,901
---------- ----------
Expenses
Leasing 30,006 27,618
General and administrative 78,767 63,701
Management fees 59,820 58,637
Utilities 117,886 109,968
Repairs and maintenance 278,914 166,045
Insurance 41,921 43,800
Taxes 85,657 79,013
----------- -----------
Total operating expenses 692,971 548,782
----------- -----------
Other expenses
Partnership expenses 18,773 29,317
Interest expense 193,120 194,290
Depreciation and amortization 229,546 205,037
----------- -----------
Total expenses 1,134,410 977,426
----------- -----------
Net income (loss) $ (111,400) $ 35,475
=========== ============
Net income (loss) allocated to General Partner $ (1,114) $ 354
========== ==============
Net income (loss) allocated to Limited Partner unit holders' $ (94,690) $ 30,154
============= ===========
Net income (loss) allocated to Special Limited Partner $ (15,596) $ 4,967
============ ==============
Net income (loss) allocated to each unit $ (1.89) $ .60
=========== ================
See notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
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For the Three Months Ended
March 31, 1996 and 1995 (Unaudited) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flow from operating activities:
Net Income (loss) $(111,400) $ 35,475
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 229,546 205,037
Changes in assets and liabilities:
Increase in security deposits cash (26,033) (7,119)
Increase in other assets (48,659) (42,227)
(Decrease) increase in accounts payable (197,085) 2,103
Decrease in prepaid rent (7,759) (4,136)
Increase (decrease) in tenant security deposits 383 (17,013)
Decrease in other liabilities (40,433) (55,661)
---------- ----------
Net cash provided by (used in) operating activities (201,440) 116,459
------------ ----------
Cash flow from investing activities:
Additions to buildings and improvements (72,009) (44,077)
---------- ----------
Net cash used in investing activities (72,009) (44,077)
---------- ----------
Cash flow from financing activities:
Principal payments on mortgage note (12,863) (11,693)
Cash distributions paid to partners (151,485) -
----------- ---------
Net cash used in financing activities (164,348) (11,693)
---------- ----------
Net increase (decrease) in cash (437,797) 60,689
Cash, beginning of period 575,510 248,928
---------- ----------
Cash, end of period $ 137,713 $ 309,617
========== ==========
Supplemental disclosure of cash flow information
Cash paid for interest $ 193,120 $ 194,290
========== ==========
See notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------------
Units of
For the Three Months Ended Limited Special Limited
March 31, 1996 and 1995 Partnership General Limited Partner/
(Unaudited) Interest Partner Partner Unitholder
Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 50,000 $ (36,377) $(463,460) $ 7,340,048 6,840,211
Net loss - (1,114) (15,596) (94,690) (111,400)
(111,400) - (1,504) (21,204) (128,777) (151,485)
------------ ----------- ------------ ---------- ---------
Balance, March 31, 1996 50,000 $ (38,995) $ (500,260) $ 7,116,581 6,527,326
Balance, December 31, 1995 50,000 $ (39,023) $ (497,906) $7,412,475 $6,875,546
Net income - 345 4,967 30,154 35,466
-------- ---------- ----------- ----------
Balance, March 31, 1995 50,000 $ (38,678) $ (492,939) $7,442,629 $6,911,012
See notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 fees paid or accrued by the Partnership to Winthrop
Management, an affiliate of the General Partners, totaled $59,820 during the
three months ended March 31, 1996. 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 ANALYSIS 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 quarter ended March 31, 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 1995. As of
March 31, 1995 the Partnership's unrestricted cash balance had decreased to
$137,713 from $575,510 at the December 31, 1995. The Partnership Agreement
requires the Partnership to retain reserves in an amount equal to at least 1% of
the Capital Contributions of the unit holders.
In 1996, the Partnership plans to spend an additional $750,000 on capital
improvements, which would include additional exterior painting and repairs at
Forestbrook, exterior painting and repairs at Sterlingwood, balcony and exterior
siding repairs at Seasons Chase, and paving repairs and carpet and appliance
replacement at all four properties.
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
replenish reserves and 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, Winthrop Management
commenced a capital improvement program at each of the properties, which was
estimated to cost approximately $1.5 to $2.0 million over an approximately
four-year period. From 1992 through 1995, the Partnership spent $1,885,000 on
capital improvements.
With respect to the capital improvement program $72,009 and $44,007 was spent on
capital improvements funded from operations for the three months ending March
31, 1996 and 1995, respectively. 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 $477,134 at March 31, 1996. Capital improvements at the remaining
two properties (Pelham Ridge and Seasons Chase Apartments) are funded entirely
from operations.
<PAGE>
RESULTS OF OPERATIONS
Net loss for the three months ended March 31, 1996 was $111,400 as compared to
net income of $35,475 for the three months ended March 31, 1995. Total income
increased only 1%, primarily as a result of a 1% increase in rental income for
the first quarter of 1996 when compared to the first quarter of 1995. Average
rents at the properties have increased 5.2% since the first quarter of 1995
while average occupancy has decreased from 92.9% to 89.7%. Sterlingwood
experienced a slight increase in occupancy from 89.1% to 90.8% due to new
leasing personnel and strong marketing programs. Decreases in occupancy have
been significant at Forestbrook from 93.7% to 91.8%, Pelham Ridge from 94% to
89.4%, and Seasons Chase from 93.5% to 87.4%. Unfortunately, all three
properties had many non-renewals due to 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 a state of disrepair.
A fire in September 1995 has left Season's Chase with 13 units down. These units
are expected to be ready for rent during the second quarter of 1996.
Interest income and other income remained relatively stable, increasing 1.3%
from $55,739 at March 31, 1995 to $56,500 at March 31, 1996.
Direct operating costs of the Partnership's properties increased from $548,782
to $692,971 or approximately 26% when compared to the first quarter of 1995. The
increase was primarily as a result of increased utility and repairs and
maintenance expenses. The higher utility costs were the result of increased
water and gas charges primarily at Season's Chase Repairs and Maintenance
expense increase was a result of the fire damage at Season Chase of
approximately $85,000. Debt service interest and amortization expenses remained
stable, while depreciation expense of the Partnership increased as a result of
capital spending in 1996.
The results of operations in future quarters may differ from those for the
quarter ended March 31, 1996, due to inflation and changing economic conditions
which could affect vacancy levels, rental rates and operating expenses.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Except as disclosed below, the Partnership is not a party, nor are any of its
properties subject, to any material pending legal proceedings.
RTC Commercial Loan Trust 1995 - NP1A, a Delaware business trust, Plaintiff v.
Winthrop Management, a Massachusetts general partnership, Defendant, United
States District Court for the Eastern District of Virginia; Case No. 3:96CV177.
On April 15, 1996, the United States District Court for the Eastern District of
Virginia granted defendant's motion to dismiss without predjudice the plaintiff
and vacate the court's March 20th order to appoint a receiver due to a lack of
diversity jurisdiction.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
No Report on Form 8-K was required to be filed during the period.
<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 PROPERTIES
LIMITED PARTNERSHIP
By: Winthrop Southeastern Limited Partnership
Its General Partner
By: Eight Winthrop Properties, Inc.
Its General Partner
By: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
By: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
Dated: May 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
three month period ending March 31, 1996 and is
qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000802969
<NAME> Southeastern Income Properties LP
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
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<CASH> 137713
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</TABLE>
