<PAGE>
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, 1998 Commission File Number 0-16848
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
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(exact name of small business issuer as specified in its charter)
Virginia 54-1350850
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organizaiton)
Five Cambridge Center, Cambridge, MA 02142
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
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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
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS
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March 31, December 31,
1998 1997
(Unaudited) (Audited)
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ASSETS
Investment in real estate
Land $ 1,817,096 $ 1,817,096
Buildings and building improvements 18,892,819 18,892,819
Personal property 4,539,645 4,463,982
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25,249,560 25,173,897
Less accumulated depreciation 12,166,523 11,953,423
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13,083,037 13,220,474
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Cash and cash equivalents 1,320,256 1,171,707
Tenant security deposits - funded 122,685 126,575
Mortgage escrow deposits 57,450 32,400
Reserves for replacements 415,615 396,439
Loan cost, net accumulated amortization of
$19,089 and $12,089 265,102 272,102
Other assets 328,680 288,020
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2,509,788 2,287,243
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Total assets $15,592,825 $15,507,717
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities applicable to investment in real estate
Mortgage payable $ 8,454,616 $ 8,470,142
Other liabilities
Rent deferred credits 21,693 16,841
Accrued interest payable 99,424 58,424
Tenant security deposits liability 130,474 133,763
Other liabilities 134,414 134,924
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Total liabilities 8,840,621 8,814,094
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Partners' capital
Limited partners' unit holders 50,000
units authorized and outstanding 7,244,030 7,194,236
Special limited partner (456,069) (464,270)
General partner (35,757) (36,343)
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Total partners' capital 6,752,204 6,693,623
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Total liabilities and partners' capital $15,592,825 $15,507,717
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See notes to financial statements
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
For the three months ended March 31, 1998 and 1997
1998 1997
(Unaudited) (Unaudited)
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Income
Rental $1,054,785 $ 979,055
Interest income 7,040 601
Other income 55,295 75,815
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Total income 1,117,120 1,055,471
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Expenses
Leasing 27,109 32,213
General and administrative 81,506 78,092
Management fees 64,197 61,418
Utilities 125,085 115,348
Repairs and maintenance 194,224 219,814
Insurance 42,291 35,296
Taxes 79,359 76,116
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Total operating expenses 613,771 618,297
Other expenses
Partnership expense 46,498 31,189
Interest expense 178,170 191,833
Depreciation and amortization 220,100 218,565
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Total expenses 1,058,539 1,059,884
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Net income (loss) $ 58,581 $ (4,413)
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Net income (loss) allocated to general
partner $ 586 $ (44)
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Net income (loss) allocated to limited
partner unit holders $ 49,794 $ (3,751)
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Net income (loss) allocated to special
limited partner $ 8,201 $ (618)
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Net income (loss) allocated to each unit $ 1.00 $ (.08)
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Weighted average number of units outstanding 50,000 50,000
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Set notes to financial statements
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
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For the three months ended Special Partners Total
March 31, 1998 and 1997 General limited unit partners'
(unaudited) partner partner holders capital
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Balance December 31, 1996 $ (38,404) $ (493,126) $ 7,019,039 $ 6,487,509
Net loss (44) (618) (3,751) (4,413)
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Balance, March 31, 1997 $ (38,448) $ (493,744) $ 7,015,288 $ 6,483,096
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Balance December 31, 1997 $ (36,343) $ (464,270) $ 7,194,236 $ 6,693,623
Net income 586 8,201 49,794 58,581
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Balance, March 31, 1998 $ (35,757) $ (456,069) $ 7,244,030 $ 6,752,204
=========== ============ ============ ===========
Note: Units of Limited Partnership Interest for both March 31, 1997 and
March 31, 1998 were 50,000.
See notes to financial statements
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
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For the three months ended 1998 1997
March 31, 1998 and 1997 (Unaudited) (Unaudited)
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Cash flow from operating activities:
Net income (loss) $ 58,581 $ (4,413)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 220,100 218,565
Changes in operating assets and liabilities
Security deposits - funded 3,890 (5,585)
Mortgage escrow deposits (25,050) (46,041)
Other assets (40,660) (17,064)
Accrued interest payable 41,000 -
Rent deferred credits 4,852 (10,580)
Tenant security deposits (3,289) 11,766
Other liabilities (510) 26,026
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Net cash provided by operating activities 258,914 172,674
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Cash flows from investing activities:
Additions to buildings and improvements (75,663) (185,328)
Additions to replacement reserves (19,176) (21,210)
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Net cash used in investing activities (94,839) (206,538)
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Cash flows from financing activities:
Principal payments on mortgage note (15,526) (14,150)
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Net cash used in financing activities (15,526) (14,150)
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Net increase (decrease) in cash and cash equivalents 148,549 (48,014)
Cash and cash equivalents, beginning of period 1,171,707 384,491
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Cash and cash equivalents, end of period $1,320,256 $336,477
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Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 137,170 $191,833
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See notes to financial statements
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
1. ACCOUNTING AND FINANCIAL REPORTING POLICIES
The condensed consolidated financial statements included herein have
been prepared by the Partnership, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. The
Partnership'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 Partnership's Annual Report
on Form 10KSB. Certain amounts have been reclassified to conform to the
March 31, 1998 presentation.
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, 1998.
2. TAXABLE INCOME
The Partnership's results of operations on a tax basis are expected to
differ from net income for financial reporting purposes primarily due to
the accounting differences in the recognition of depreciation and
amortization.
3. RELATED PARTY TRANSACTIONS
Asset management fees paid or accrued by the Partnership to affiliates
of the General Partner, totaled $8,693 during the three months ended
March 31, 1998 and 1997, respectively.
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
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, 1998, rental revenue and other income from
the properties, along with interest income from the Partnership's short-term
investments, was sufficient to cover all operating expenses and debt service of
the properties and all administrative expenses of the Partnership, as well as
all capital improvements made to the properties during the quarter. As of
March 31, 1998, the Partnership's unrestricted cash balance had increased to
$1,320,256 from $1,171,707 at the end of 1997. The increase was due to $258,914
of cash provided by operating activities which was partially offset by $94,839
net cash used for investing activities and $15,526 of cash used for mortgage
principal reductions.
Cash provided by operating activities increased primarily due to the improved
net income of the properties. All other increases (decreases) in certain
operating assets and liabilities are the result of the timing of receipt and
payment of various activities.
Cash used in investing activities consisted of $75,663 in improvements to real
estate as well as funding replacement reserves in the amount of $19,176.
In April 1998, the Partnership declared a distribution of approximately
$365,000, or $7.19 per limited partnership unit. It is expected that future
rental revenue and other income from the Partnership's properties will continue
to 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 capital improvements. The
performance of the Partnership's properties and its distributions policy,
however, will continue to be reviewed on a quarterly basis.
On March 6, 1998, the Partnership entered into an agreement to sell its
Forestbrook Apartments property to an unaffiliated third party for a purchase
price of $6,550,000. This sale is conditioned upon the buyer being able to
assume the existing loan encumbering the property. It is expected that this
sale, if consummated, will close during the second quarter of 1998. There can be
no assurance, however, that this sale will be consummated or, if consummated, at
the current purchase price.
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.
7
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (Continued)
Liquidity and Capital Resources (Continued)
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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 stablized, 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.
As of March 31, 1998, the Partnership has $1,320,256 in unrestricted cash. The
Partnership has invested, and expects to continue to invest, such amounts in
money market instruments until required for Partnership purposes. In addition,
the Partnership has replacement reserves of $415,615 held by the mortgage
lenders for Forestbrook and Sterlingwood Apartments. These funds are restricted
under the terms of the mortgage loans for those two properties. The
Partnership's total cash balance, both restricted and unrestricted, as of
March 31, 1998, was therefore $1,735,871, which is expected to be sufficient to
satisfy working capital requirements set forth in the partnership agreement. The
partnership agreement requires the Partnership to retain reserves in an amount
equal to at least 1% of capital contributions of unit holders.
The Partnership is dependent upon the General Partner for management and
administrative services. The General Partner has completed an assessment and
believes that its computer systems will function properly with respect to dates
in the year 2000 and thereafter (the "Year 2000 Issue"). Accordingly, it is not
expected that the Partnership will incur any material costs associated with, or
be materially affected by, the Year 2000 Issue.
Results of Operations
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The Partnership generated net income of $58,581 for the quarter ended March 31,
1998, as compared to a net loss of $4,413 for the quarter ended March 31, 1997.
The improved results were due to increased revenues while operating and other
expenses remained relatively stable.
The Partnership's total revenue increased in 1998 to $1,117,120 from $1,055,471
in 1997, primarily due to increased rental revenue and intereset income
partially offset by decreased other income. Rental revenue increased due to
higher average rents and higher average occupancy. Overall, average rents for
the Partnership's properties increased by 2.3%, to $495 per month in 1998 from
$484 per month in 1997, which was augmented by an increase in average occupancy
of 90% in 1998 from 89% in 1997. Interest income increased due to higher average
cash balances available for investment. Other income decreased in 1998 compared
to 1997 due to decreases in lease termination fees, forfeited deposits and late
fees as a result of a more stabilized tenant population.
-8-
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (Continued)
Results of Operations (Continued)
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The Partnership's operating expenses decreased in 1998 to $613,771 from $618,297
in 1997, due primarily to decreases in repairs and maintenance, which was
partially offset by increases in utilities. Repairs and maintenance expense
decreased primarily as a result of decreased carpeting repairs. Utilities
expense increased primarily due to higher water and sewerage expense. The
increase reflects high volume usage and increased rates. The remaining operating
expenses were relatively stable for the comparable period.
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K. No report on Form 8-K was required to be
filed during the period.
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
SIGNATURE
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.
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
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Michael L. Ashner
Chief Executive Officer
By: /s/ Edward V .Williams
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Edward V .Williams
Chief Financial Officer
Dated: May 13, 1998
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<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, 1998 and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,320,256
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 25,249,560
<DEPRECIATION> (12,166,523)
<TOTAL-ASSETS> 15,592,825
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 6,752,204
<TOTAL-LIABILITY-AND-EQUITY> 15,592,825
<SALES> 0
<TOTAL-REVENUES> 1,110,080
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 798,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178,170
<INCOME-PRETAX> 58,581
<INCOME-TAX> 0
<INCOME-CONTINUING> 58,581
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,581
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
