<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 June 30, 1998 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)
Five Cambridge Center, Cambridge, MA 02142
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
--------------
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>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
(Unaudited) (Audited)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in real estate
Land $ 1,817,096 $ 1,817,096
Buildings and building improvements 18,892,819 18,892,819
Personal property 4,648,791 4,463,982
----------------- -----------------
25,358,706 25,173,897
Less accumulated depreciation 12,341,423 11,953,423
----------------- -----------------
13,017,283 13,220,474
----------------- -----------------
Cash and cash equivalents 1,235,697 1,171,707
Tenant security deposits - funded 120,824 126,575
Mortgage escrow deposits 126,072 32,400
Reserves for replacements 447,889 396,439
Loan cost, net accumulated amortization of $26,089
and $12,089 258,102 272,102
Other assets 212,717 288,020
----------------- -----------------
2,401,301 2,287,243
----------------- -----------------
Total assets $ 15,418,584 $ 15,507,717
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities applicable to investment in real estate
Mortgage payable $ 8,426,896 $ 8,470,142
Other liabilities
Rent deferred credits 26,626 16,841
Accrued interest payable 58,424 58,424
Tenant security deposits liability 122,068 133,763
Other liabilities 216,685 134,924
----------------- -----------------
Total liabilities 8,850,699 8,814,094
----------------- -----------------
Partners' capital
Limited partners' unit holders 50,000 units authorized
and outstanding 7,037,750 7,194,236
Special limited partner (435,773) (464,270)
General partner (34,092) (36,343)
----------------- -----------------
Total partners' capital 6,567,885 6,693,623
================= =================
Total liabilities and partners' capital $ 15,418,584 $ 15,507,717
================= =================
</TABLE>
See notes to financial statements
- 2 -
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For the three and six months ended Three months ended June 30, Six months ended June 30,
June 30, 1998 and 1997 (Unaudited) (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
----------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income
Rental $ 1,059,286 $ 1,056,765 $ 2,114,071 $ 2,035,820
Interest income 3,661 1,019 10,701 1,620
Other income 70,850 79,394 126,145 155,209
----------------- --------------- --------------- ---------------
Total income 1,133,797 1,137,178 2,250,917 2,192,649
----------------- --------------- --------------- ---------------
Expenses
Leasing 20,482 30,609 47,591 62,822
General and administrative 87,535 89,268 169,041 167,360
Management fees 64,609 73,672 128,806 135,090
Utilities 88,430 104,257 213,515 219,605
Repairs and maintenance 187,352 212,178 381,576 431,992
Insurance 41,130 39,044 83,421 74,340
Taxes 91,822 77,182 171,181 153,298
----------------- --------------- --------------- ---------------
Total operating expenses 581,360 626,210 1,195,131 1,244,507
Other expenses
Partnership expense 15,330 54,015 61,828 85,204
Interest expense 175,032 191,492 353,202 383,325
Depreciation and amortization 181,900 214,765 402,000 433,330
----------------- --------------- --------------- ---------------
Total expenses 953,622 1,086,482 2,012,161 2,146,366
----------------- --------------- --------------- ---------------
Net income $ 180,175 $ 50,696 $ 238,756 $ 46,283
================= =============== =============== ===============
Net income allocated to
general partner $ 1,802 $ 507 $ 2,388 $ 463
================= =============== =============== ===============
Net income allocated to
limited partner unit holders $ 153,148 $ 43,092 $ 202,942 $ 39,340
================= =============== =============== ===============
Net income allocated to
special limited partner $ 25,225 $ 7,097 $ 33,426 $ 6,480
================= =============== =============== ===============
Net income allocated to each unit $ 3.06 $ 0.86 $ 4.06 $ 0.79
================= =============== =============== ===============
Weighted average number of units
outstanding 50,000 50,000 50,000 50,000
================= =============== =============== ===============
</TABLE>
See notes to financial statements
- 3 -
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
For the six months ended Special Partner Total
June 30, 1998 and 1997 General partner Limited Unit Partners'
(unaudited) Partner Holders capital
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 $ (36,343) $ (464,270) $ 7,194,236 $ 6,693,623
Net income 2,388 33,426 202,942 238,756
Distributions (137) (4,929) (359,428) (364,494)
---------------- -------------- --------------- ----------------
Balance, June 30, 1998 $ (34,092) $ (435,773) $ 7,037,750 $ 6,567,885
================ ============== ================ ================
Balance, December 31, 1996 $ (38,404) $ (493,126) $ 7,019,039 $ 6,487,509
Net income 463 6,480 39,340 46,283
---------------- -------------- --------------- ----------------
Balance, June 30, 1997 $ (37,941) $ (486,646) $ 7,058,379 $ 6,533,792
================ ============== ================ ================
</TABLE>
Note: Units of Limited Partnership Interest for both June 30, 1997 and
June 30, 1998 were 50,000.
See notes to financial statements
- 4 -
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
For the six months ended 1998 1997
June 30, 1998 and 1997 (Unaudited) (Unaudited)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 238,756 $ 46,283
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 402,000 433,330
Changes in operating assets and liabilities
Security deposits - funded 5,751 (47,549)
Mortgage escrow deposits (93,672) (93,999)
Other assets 75,303 (21,851)
Tenant security deposits (11,695) 52,163
Other liabilities 81,761 144,496
Rent deferred credits 9,785 (1,331)
----------------- -----------------
Net cash provided by operating activities 707,989 511,542
----------------- -----------------
Cash flows from investing activities:
Additions to buildings and improvements (184,809) (206,306)
Additions to replacement reserves (51,450) (42,420)
----------------- -----------------
Net cash used in investing activities (236,259) (248,726)
----------------- -----------------
Cash flows from financing activities:
Principal payments on mortgage note (43,246) (28,642)
Cash distributions paid to partners (364,494) -
Payment of loan cost - (117,500)
----------------- -----------------
Net cash used in financing activities (407,740) (146,142)
----------------- -----------------
Net increase in cash and cash equivalents 63,990 116,674
Cash and cash equivalents, beginning of period 1,171,707 384,491
----------------- -----------------
Cash and cash equivalents, end of period $ 1,235,697 $ 501,165
================= =================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 353,202 $ 383,325
================= =================
</TABLE>
See notes to financial statements
- 5 -
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. ACCOUNTING AND FINANCIAL REPORTING POLICIES
The condensed consolidated financial statements included herein have been
prepared by Southeastern Income Properties Limited Partnership (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 June 30, 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 $17,386 and $25,557 during the six months ended June
30, 1998 and 1997, respectively.
-6-
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Liquidity and Capital Resources
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.). The discussion of the
Partnership's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects
of any changes to the Partnership's business and results of operations.
Accordingly, actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
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 six months ended June 30, 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 June
30, 1998, the Partnership's unrestricted cash balance had increased to
$1,235,697 from $1,171,707 at the end of 1997. The increase was due to $707,989
of cash provided by operating activities which was partially offset by $236,259
net cash used for investing activities and $407,740 of cash used for mortgage
principal reductions and cash distributions.
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 $184,809 in improvements to real
estate as well as funding replacement reserves in the amount of $51,450.
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.
- 7 -
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (Continued)
Liquidity and Capital Resources (Continued)
The Partnership is in the process of reviewing the status of all the properties
with a view towards disposing all of its properties, depending on property
operations and market conditions. 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 third 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.
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.
The Partnership has invested, and expects to continue to invest, its
unrestricted cash in money market instruments until required for Partnership
purposes. In addition, the Partnership has replacement reserves of $447,889 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
June 30, 1998, was therefore $1,683,586, 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.
- 8 -
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (Continued)
Results of Operations
The Partnership generated net income of $238,756 for the six months ended June
30, 1998, as compared to net income of $46,283 for the six months ended June
30, 1997. The improved results were due to increased revenue and decreased
operating and other expenses.
The Partnership's total revenue increased for the six months ended June 30,
1998 to $2,250,917 from $2,192,649 for the comparable period in 1997, primarily
due to increased rental revenue and interest 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, while average occupancy was stable at 91% in 1998 and 1997. Occupancy at
the Sterlingwood property dropped while the remaining three properties had
increased occupancy sufficient to offset the decrease at Sterlingwood. 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.
The Partnership's operating expenses decreased in 1998 to $1,195,131 from
$1,244,507 in 1997, due primarily to a decrease in repairs and maintenance
expenditures, while the remaining operating expenses remained relatively
stable. Repairs and maintenance expense decreased primarily as a result of
decreased carpeting repairs. Other expenses reflect savings in all categories.
Savings in partnership expense resulted from reduced professional fees.
Interest expense decreased as a result of the refinancing of the Forestbrook
mortgage loan in the third quarter of 1997. Reduced depreciation expense
reflects the retirement of assets.
- 9 -
<PAGE>
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
27. Financial Data Schedule, is filed as an Exhibit to this report
(b) Reports on Form 8-K. No report on Form 8-K was required to be
filed during the period.
- 10 -
<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
Date: August 12, 1998 By: /s/ Michael L. Ashner
------------------------
Michael L. Ashner
Chief Executive Officer
By: /s/ Edward V. Williams
------------------------
Edward V. Williams
Chief Financial Officer
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from unaudited
financial statements for the six month period ending June 30, 1998 and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,235,697
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 25,358,706
<DEPRECIATION> (12,341,423)
<TOTAL-ASSETS> 15,418,584
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 6,567,885
<TOTAL-LIABILITY-AND-EQUITY> 15,418,584
<SALES> 0
<TOTAL-REVENUES> 2,250,917
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,087,918
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 353,202
<INCOME-PRETAX> 238,756
<INCOME-TAX> 0
<INCOME-CONTINUING> 238,756
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 238,756
<EPS-PRIMARY> 4.06
<EPS-DILUTED> 4.06
</TABLE>
