<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of Securities Exchange Act of 1934
Commission File
For the fiscal year ended December 31, 1998 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
incorporation or organization) Identification No.)
5 Cambridge Center, 9th Floor, Cambridge, Massachusetts 02142
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 234-3000
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. / /
Registrant's revenues for its most recent fiscal year were $8,584,433.
No market exists for the limited partnership interests of the Registrant and
therefore, no aggregate market value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Description of Business.
Southeastern Income Properties Limited Partnership (the "Registrant")
was organized under the Virginia Uniform Limited Partnership Act on November 21,
1985 for the purpose of acquiring, owning, operating, and ultimately selling
existing residential apartment complexes located primarily in the southeastern
United States. The general partner of the Registrant is Winthrop Southeast
Limited Partnership, a Delaware limited partnership ("WSLP" or the "Managing
General Partner"), whose general partner is Eight Winthrop Properties, Inc., a
Delaware corporation ("Eight Winthrop"). Eight Winthrop, is a wholly owned
subsidiary of First Winthrop Corporation which is controlled by Winthrop
Financial Associates, A Limited Partnership ("WFA").
In 1987, the Registrant sold, pursuant to a Registration Statement
filed with the Securities and Exchange Commission, 50,000 assignee units of
limited partnership interest ("Units") at a purchase price of $500 per Unit (an
aggregate of $25,000,000).
The Registrant's only business is acquiring, owning, operating and
ultimately selling residential apartment complexes. The Registrant invested
$20,593,101 of the original offering proceeds (net of sales commissions and
sales and organizational costs, but including acquisition fees and expenses) in
four residential apartment properties. During 1998, the Registrant sold three of
its Properties and the remaining property is currently under contract for sale.
If the Registrant's final property is sold in 1999, the Registrant will be
dissolved. See "Item 6. Management's Discussion and Analysis or Plan of
Operation" for further information relating to the anticipated dissolution of
the Registrant. See "Property Matters" below.
Property Matters
Forestbrook Apartments - On September 1, 1998, the Registrant sold its
Forestbrook Apartments property to an unaffiliated third party for a purchase
price of $6,550,000. In connection with this sale, the purchaser assumed the
existing mortgage indebtedness on the property ($5,685,090). After closing costs
and adjustments of $191,784, the Registrant received net proceeds of $673,126
which were distributed to the Registrant's partners during the fourth quarter of
1998. The sale generated a gain of approximately $1,684,000 for financial
reporting purposes.
Pelham Ridge Apartments - On November 23, 1998, the Registrant sold its
Pelham Ridge Apartments property to an unaffiliated third party for a purchase
price of $4,200,000. After closing costs and adjustments of $305,267, the
Registrant received net proceeds of $3,894,733 which were distributed during the
fourth quarter of 1998. The sale generated a gain of approximately $1,682,000
for financial reporting purposes.
Seasons Chase Apartments - On November 25, 1998, the Registrant sold
its Seasons Chase Apartments property located to an unaffiliated third party for
a purchase price of
2
<PAGE>
$4,500,000. After closing costs and adjustments of $197,443, the Registrant
received net proceeds of $4,302,557 which were distributed during the fourth
quarter of 1998. The sale generated a gain of approximately $1,375,000 for
financial reporting purposes.
See "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters" for information relating to the distribution of the net
proceeds from these sales.
Sterlingwood Apartments - The Registrant has entered into an agreement
to sell its Sterlingwood Apartments property to an unaffiliated third party for
a purchase price of $3,250,000. This sale is conditioned upon the buyer being
able to assume the existing loan encumbering the property. It is expected that
this sale, if it is consummated, will close during the first half of 1999. There
can be no assurance, however, that this sale will be consummated or, if
consummated, that it will be sold at the current purchase price.
Employees
The Registrant has four employees. Until March 18, 1996, management
services were performed for the Registrant at its properties by on-site
personnel all of whom were employees of Winthrop Management, an affiliate of the
Managing General Partner, which directly managed the Registrant's properties.
All payroll and associated expenses of such on-site personnel were fully
reimbursed by the Registrant to Winthrop Management. Pursuant to a management
agreement, Winthrop Management provided certain property management services to
the Registrant in addition to providing on-site management. Winthrop Management
is a Massachusetts general partnership whose Managing General partner is First
Winthrop Corporation, the parent of Eight Winthrop.
On March 18, 1996, Registrant appointed an unaffiliated management
company to assume management of its properties. (See "Item 3, Legal
Proceedings.") The provisions of the new management agreement are substantially
similar to those of the Winthrop Management Agreement. The term of the existing
management agreement is for one year, renewable annually. Effective November 1,
1998, Winthrop Management resumed management of the Registrant's properties and
hired its own employees.
Competition
The real estate business is highly competitive and the Registrant's
remaining property has active competition from similar properties in the
vicinity. Furthermore, various limited partnerships controlled by the Managing
General Partner and/or its affiliates are also engaged in business which may be
competitive with the Registrant. In the event the sale of the Registrant's
remaining property is not consummated, the Registrant would also be competing
for potential buyers with respect to the ultimate sale of its property. See
"Item 6, Management's Discussion and Analysis or Plan of Operation."
3
<PAGE>
Item 2. Description of Property.
The Registrant's remaining property, Sterlingwood Apartments (the
"Property"), is located in Roanoke, Virginia and contains 162 apartment units.
The Property was originally acquired on November 27, 1985 for a purchase price
of $4,732,194 and is owned in fee simple by the Registrant. Average annual
occupancy and per unit average monthly rental rate for the years ended December
31, 1998 and 1997 were as follows:
1998 1997
---- ----
Occupancy 92% .94
Average Monthly Rental Rate $439 $437
On August 27, 1997, the loan encumbering Sterlingwood Apartments was
refinanced. The loan bears interest at a rate of 7.625% per annum and matures on
September 1, 2007, at which time the loan is scheduled to have an outstanding
principal balance of $2,206,000. The loan payments are based on a 25 year
amortization schedule. At December 31, 1998, the outstanding principal balance
due on the loan was $2,698,428. In addition to monthly payments of interest and
principal, the Registrant is required to escrow monthly approximately $8,000 for
taxes and insurance and $2,025 for tenant improvements. Furthermore, $252,228
which was held in a reserve account with the prior lender was transferred to a
reserve account maintained by the new lender.
Set forth below is a table showing the carrying value and accumulated
depreciation and federal tax basis of the Property as of December 31, 1998.
Federal
Carrying Accumulated Tax
Value Depreciation Rate Method Basis
- -------------- ------------ -------- ------ ----------
$5,281,000 $3,511,000 5-30 yrs S/L $1,770,339
The realty tax rate and realty taxes paid for the Property in 1998 were
$1.35 and $48,422.
As noted under "Item 1, Description of Business", the real estate
industry is highly competitive. The Property is subject to competition from
other apartment complexes in the area. The Registrant maintains property and
liability insurance on the Property which the Registrant believes to be
adequate. The apartment leases for the Property are for a term of one year or
less, and no tenant leases 10% or more of the available rental space. Except for
necessary capital expenditures, the Registrant has no present intentions of
investing any additional capital in the Property.
Item 3. Legal Proceedings.
The Registrant is not a party, nor are any of its properties subject,
to any material pending legal proceedings.
4
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period
covered by this report.
5
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Registrant is a partnership and thus has no common stock. There is
currently no established public market in which the Units are traded, nor is it
anticipated that a public market will develop. Trading in the Units is sporadic
and occurs solely through private transactions.
As of January 19, 1999 there were 2,576 holders of the 50,000 Units.
No cash distributions were paid to holders of Units in 1997. In 1998,
the Registrant distributed $10,222,455 ($204.45 per Unit) to holders of Units
from cash flow from operations and net proceeds from the sales of the
Registrant's Forestbrook, Pelham Ridge and Seasons Chase properties. See "Item
6, Management's Discussion and Analysis or Plan of Operation," for information
relating to the Registrant's future distributions.
6
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
The matters discussed in this Form l0-KSB contain certain
forward-looking statements and involve risks and uncertainties (including
changing market conditions, competitive and regulatory matters, etc.) detailed
in the disclosures contained in this Form 10-KSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant'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 Registrant'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.
Liquidity and Capital Resources
The Registrant receives rental income from its properties and is
responsible for operating expenses, administrative expenses, capital
improvements and debt service payments. The Registrant's remaining property is
leased to tenants who are subject to leases of up to one year. During 1998, the
Registrant sold three of its four properties. The remaining residential property
is Sterlingwood Apartments located in Roanoke, Virginia. Upon sale of the
Registrant's remaining property, the Partnership will be liquidated.
During the year ended December 31, 1998, rental revenue and other
income from the properties, along with interest income from the Registrant's
short-term investments, was sufficient to cover all operating expenses and debt
service of the properties and all administrative expenses of the Registrant; as
well as all capital improvements made to the properties during 1998. As of
December 31, 1998, the Registrant's unrestricted cash balance had decreased to
$600,008 from $1,171,707 as of December 31, 1997. The decrease was due to
$10,322,414 of cash used in financing activities, which was partially offset by
$8,513,232 of net cash provided by investing activities and $1,237,483 of net
cash provided by operating activities. Net cash used in financing activities
consisted of $10,235,790 of distributions to partners and $86,624 of mortgage
principal payments. Distributions made during the year ended December 31, 1998
consisted of proceeds from the sales of Forestbrook, Pelham Ridge and Seasons
Chase properties and excess cash flow from operations. Net cash provided by
investing activities consisted of $8,912,328 of net proceeds from the sale of
the Registrant's Forestbrook, Pelham Ridge and Season Chase properties, which
was slightly offset by $323,728 of improvements to real estate and a $75,368
increase in replacement reserves. All other increases (decreases) in certain
assets and liabilities are the result of the timing of receipt and payment of
various activities.
During 1998, the Registrant distributed $10,222,455 ($204.45 per unit)
to the limited partners from net proceeds received from property sales and cash
flow from operations. It is expected that future rental revenue and other income
from the Registrant's remaining property will be sufficient to cover all
administrative expenses of the Registrant and all operating expenses and debt
service of the property, as well as necessary capital improvements to the
property.
7
<PAGE>
On September 1, 1998, the Partnership sold its Forestbrook Apartments
property to an unaffiliated third party for a purchase price of $6,550,000. The
purchaser of the property assumed the outstanding debt on the property of
$5,685,090. After closing costs and adjustments, the Partnership received net
proceeds of $715,038. An extraordinary loss on extinguishment of debt of
$205,970, representing the write off of the unamortized loan costs related to
the mortgage note payable and a disposition fee, has been recorded for the year
ended December 31, 1998. For financial reporting purposes, the sale resulted in
a gain of approximately $1,684,000.
On November 23, 1998, the Partnership sold its Seasons Chase Apartments
property to an unaffiliated third party for a purchase price of $4,500,000.
After closing costs and adjustments, the Partnership received net proceeds of
$4,302,557. For financial reporting purposes, the sale resulted in a gain of
approximately $1,682,000.
On November 25, 1998, the Partnership sold its Pelham Ridge Apartments
property to an unaffiliated third party for a purchase price of $4,200,000.
After closing costs and adjustments, the Partnership received net proceeds of
$3,894,733. For financial reporting purposes, the sale resulted in a gain of
approximately $1,375,000.
The Registrant has entered into an agreement with an unaffiliated third
party to sell the Sterlingwood Apartments property, the only remaining property
in the Partnership, for a purchase price of $3,200,000. The 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 1999. There can be no assurance, however, that this sale will be
consummated or, if consummated, that it will be sold at the current selling
price. For financial statement purposes, the sale will result in a gain in 1999.
As of December 31, 1998, the Registrant has $600,008 in unrestricted
cash. The Registrant has invested, and expects to continue to invest, such
amounts in money market instruments until required for partnership purposes. In
addition, the Registrant has replacement reserves of $293,363 held by the
mortgage lender for Sterlingwood Apartments. These funds are restricted under
the terms of the mortgage loan for the property. The Registrant's total cash
balance, both restricted and unrestricted, as of December 31, 1998, was
therefore $893,371, which is expected to be sufficient to satisfy working
capital requirements set forth in the Registrant's partnership agreement. The
Registrant's partnership agreement requires the Registrant to retain reserves in
an amount equal to at least 1% of capital contributions of unit holders.
8
<PAGE>
Results of Operations
The Registrant generated net income, before extraordinary loss, of
$5,036,132 for the year ended December 31, 1998, as compared to net income of
$206,114 for the year ended December 31, 1997. The improved results were due to
the sale of Registrant's Forestbrook, Pelham Ridge and Seasons Chase properties.
Rental revenue decreased, for the year ended December 31, 1998 as
compared to 1997, as a result of property sales. Rental revenue at the
Registrant's remaining property was consistent with the prior year, decreasing
by $16,868 to $741, 231 for the year ended December 31, 1998. Other income at
the Registrant's remaining property declined by $48,066 from 1997 due to
decreases in corporate unit income and lease termination fees. Overall, average
rents for the Registrant's property increased to $439 per month in 1998 from
$437 per month in 1997, which was offset by a decrease in average occupancy of
92% in 1998 from 94% in 1997.
The Registrant's operating expenses decreased for the year ended
December 31, 1998 as compared to 1997, due primarily to the property sales in
1998. Operating expenses at the Registrants remaining property decreased to
$402,826 in 1998 from $477,030 in 1997. The decrease is due primarily to
decreases in repairs and maintenance and leasing expenses. Leasing expenses
decreased as a result of lower advertising and commission expenses. All other
expenses at the remaining property remained relatively constant.
Year 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. The Registrant
is dependent upon the Managing General Partner and its affiliates for management
and administrative services. Any computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. During the first half of 1998, the
Managing General Partner and its affiliates completed their assessment of the
various computer software and hardware used in connection with the management of
the Registrant. This review indicated that significantly all of the computer
programs used by the Managing General Partner and its affiliates are
off-the-shelf "packaged" computer programs which are easily upgraded to be Year
2000 compliant. In addition, to the extent that custom programs are utilized by
the Managing General Partner and its affiliates, such custom programs are Year
2000 compliant.
Following the completion of its assessment of the computer software and
hardware, the Managing General Partner and its affiliates began upgrading those
systems which required upgrading. To date, significantly all of these systems
have been upgraded. The Registrant has to date not borne, nor is it expected
that the Registrant will bear any significant cost, in connection with the
upgrade of those systems to requiring remediation. It is expected that all
systems will be remediated, tested and implemented during the first half of
1999.
9
<PAGE>
To date, the Managing General Partner is not aware of any external
agent with a Year 2000 issue that would materially impact the Registrant's
results of operations, liquidity or capital resources. However, the Managing
General Partner has no means of ensuring that external agents will be Year 2000
compliant. The Managing General Partner does not believe that the inability of
external agents to complete their Year 2000 resolution process in a timely
manner will have a material impact on the financial position or results of
operations of the Registrant. However, the effect of non-compliance by external
agents is not readily determinable.
10
<PAGE>
Item 7. Financial Statements
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
Consolidated Financial Statements
Year Ended December 31, 1998
Table of Contents
Page
------
Independent Auditors' Reports F-2
Consolidated Financial Statements:
Balance Sheets at December 31, 1998 and 1997 F-4
Statements of Operations for the Years Ended
December 31, 1998 and 1997 F-5
Statements of Partners' Capital for the Years Ended
December 31, 1998 and 1997 F-6
Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
Independent Auditors' Report
To the Partners of
Southeastern Income Properties Limited Partnership
We have audited the accompanying balance sheet of Southeastern Income Properties
Limited Partnership (the "Partnership") as of December 31, 1998, and the related
consolidated statements of operations, changes in partners' capital and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Southeastern Income Properties Limited Partnership as of December 31, 1998, and
the results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Certified Public Accountants
New York, New York
February 15, 1999
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners and Unit Holders of
Southeastern Income Properties Limited Partnership
We have audited the accompanying balance sheets of Southeastern
Income Properties Limited Partnership as of December 31, 1997, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Southeastern
Income Properties Limited Partnership as of December 31, 1997, and the results
of its operations and its cash flows for the years then ended, in conformity
with generally accepted accounting principles.
As discussed in note H to the financial statements, on March 6, 1998,
the Partnership entered into an agreement to sell a rental property. The
rental property represents a significant portion of the Partnership's total
assets and operations.
/s/Reznick, Fedder and Silverman
Bethesda, Maryland
February 24, 1998
F-3
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1998 1997
--------------------- ---------------------
<S> <C> <C>
Assets
Real Estate, at cost:
Land $ 352,825 $ 1,817,096
Buildings and building improvements 4,286,062 18,892,819
Personal property 670,762 4,463,982
-------------------- ---------------------
5,309,649 25,173,897
Less: Accumulated depreciation (2,215,533) (11,953,423)
-------------------- ---------------------
3,094,116 13,220,474
Other Assets:
Cash and cash equivalents 600,008 1,171,707
Tenant security deposits 75,691 126,575
Mortgage escrow deposits 43,446 32,400
Reserve for replacements 293,363 396,439
Deferred loan costs, net of accumulated amortization
of $16,964 (1998) and $12,089 (1997) 110,260 272,102
Other assets 65,510 288,020
-------------------- ---------------------
Total Assets $ 4,282,394 $ 15,507,717
==================== =====================
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 2,698,428 $ 8,470,142
Prepaid rent 1,923 16,841
Accrued interest payable - 58,424
Tenant security deposits payable 13,175 133,763
Accounts payable and accrued expenses 280,873 134,924
-------------------- ---------------------
Total Liabilities 2,994,399 8,814,094
-------------------- ---------------------
Partners' Capital:
Special limited partner's deficit (434,534) (464,270)
Limited partner unit holders' equity -
50,000 units authorized and outstanding 1,712,259 7,194,236
General partner's equity (deficit) 10,270 (36,343)
-------------------- ---------------------
Total Partners' Capital 1,287,995 6,693,623
-------------------- ---------------------
Total Liabilities and Partners' Capital $ 4,282,394 $ 15,507,717
==================== =====================
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Revenues:
Rental $ 3,538,959 $ 4,148,814
Interest income 84,238 16,857
Other income 220,690 328,459
Gain on sale of properties 4,740,546 -
------------- -------------
Total revenue 8,584,433 4,494,130
------------- -------------
Expenses:
Leasing 84,231 99,301
General and administrative 337,948 406,278
Management fees 218,995 261,242
Utilities 386,479 418,678
Repairs and maintenance 798,859 923,560
Insurance 168,465 159,019
Taxes 296,221 308,662
------------- -------------
Total operating expenses 2,291,198 2,576,740
Other Expenses:
Partnership expenses 114,612 113,852
Interest expense 536,681 729,969
Depreciation and amortization 605,810 867,455
------------- -------------
Total expenses 3,548,301 4,288,016
------------- -------------
Income before extraordinary loss 5,036,132 206,114
Extraordinary loss on extinguishment of debt (205,970) -
------------- -------------
Net income $ 4,830,162 $ 206,114
============= =============
Net income allocated:
Special Limited Partner $ 41,382 $ 28,856
Limited Partners 4,740,478 175,197
General Partner 48,302 2,061
------------- -------------
Net Income $ 4,830,162 $ 206,114
============= =============
Net income allocated per limited partner unit:
Income before extraordinary loss $ 98.89 $ 3.50
Extraordinary loss on extinguishment of debt (4.08) -
------------ -------------
Net income $ 94.81 $ 3.50
============= =============
Distributions per unit:
Limited Partners $ 204.45 $ -
============= =============
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Units of Special
Limited Limited Limited General
Partnership Partner's Partners' Partner's Total
Interest Deficit Capital Capital Capital
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1996 50,000 $ (493,126) $ 7,019,039 $ (38,404) $ 6,487,509
Net income - 28,856 175,197 2,061 206,114
----------- ---------- ------------ ---------- ------------
Balance - December 31, 1997 50,000 (464,270) 7,194,236 (36,343) 6,693,623
Distributions - (11,646) (10,222,455) (1,689) (10,235,790)
Net income - 41,382 4,740,478 48,302 4,830,162
----------- ---------- ------------ ---------- ------------
Balance - December 31, 1998 50,000 $ (434,534) $ 1,712,259 $ 10,270 $ 1,287,995
=========== ========== ============ ========== ============
</TABLE>
F-6
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 4,830,162 $ 206,114
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 592,685 851,566
Amortization 12,722 15,889
Gain on sale of properties (4,740,546) -
Extraordinary loss on extinguishment of debt 205,970 -
Changes in assets and liabilities:
Tenant security deposits 50,884 (15,153)
Mortgage escrow deposits (11,046) 28,988
Other assets 344,633 (190,103)
Prepaid rent (14,918) 6,261
Accrued interest payable (58,424) (7,596)
Tenant security deposits payable (120,588) 17,634
Accounts payable and accrued expenses 145,949 (24,316)
---------------- ---------------
Net cash provided by operating activities 1,237,483 889,284
---------------- ---------------
Cash Flows From Investing Activities:
Net proceeds from sale of properties 8,912,328 -
Additions to buildings and improvements (323,728) (423,614)
Changes in replacement reserves (75,368) 151,984
---------------- ---------------
Net cash provided by (used in) investing activities 8,513,232 (271,630)
---------------- ---------------
Cash Flows From Financing Activities:
Principal payments on mortgage notes (86,624) (331,183)
Satisfaction of mortgage notes - (7,715,064)
Cash distributions paid to partners (10,235,790) -
Payment of deferred loan costs - (284,191)
Proceeds from mortgage notes payable - 8,500,000
---------------- ---------------
Net cash (used in) provided by financing activities (10,322,414) 169,562
---------------- ---------------
Net (decrease) increase in cash and cash equivalents (571,699) 787,216
Cash and cash equivalents, beginning of year 1,171,707 384,491
---------------- ---------------
Cash and cash equivalents, end of year $ 600,008 $ 1,171,707
================ ===============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 595,105 $ 737,565
================ ===============
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
Mortgage notes payable assumed by purchaser of
Forestbrook Apartments - see note 6 $ 5,685,090 $ -
================ ===============
</TABLE>
See notes to consolidated financial statements.
F - 7
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Southeastern Income Properties Limited Partnership (the
"Partnership") is a Virginia limited partnership formed in
November 1985 for the purpose of acquiring, managing and
ultimately selling existing apartment communities. The
Partnership Agreement (the "Agreement") has been amended several
times. Among the amendments were changes in the allocation of
net loss between general and limited partners during the
periods. The Agreement provided for K-A Southeastern Income
Properties Limited Partnership ("K-A SIP"), a Virginia limited
partnership, to be the general partner and for a public offering
of up to 50,000 assignee units of limited partnership interest
("Units") at $500 per unit. Purchasers of Units ("Unit Holders")
are assignees of the limited partner and are entitled to all the
rights and economic benefits of a limited partner. During 1987,
the Partnership sold all 50,000 Units. The Partnership acquired
two apartment communities - Sterlingwood in Roanoke, Virginia,
in November 1985; and Forestbrook in Charlotte, North Carolina,
in August 1986 - with borrowed funds. The Partnership used a
portion of the proceeds of the public offering to repay all the
mortgages payable related to Sterlingwood and Forestbrook and to
pay for a portion of the cost of acquiring Seasons Chase in
Greensboro, North Carolina, and Pelham Ridge in Greenville,
South Carolina. During 1998, the Partnership sold all properties
except Sterlingwood.
In early 1992, the Unit Holders approved certain changes in (and
amendments to) the Agreement, which converted K-A SIP to a
special limited partner and admitted Winthrop Southeast Limited
Partnership ("WSLP" or the "General Partner") as the sole
general partner, effective February 12, 1992. K-A SIP retained
its current capital account and adjusted capital contribution
upon its conversion to special limited partner status. Under the
revised Agreement, taxable income and loss is to be allocated
85% to Unit Holders, 14% to K-A SIP and 1% to WSLP. Federal tax
regulations, however, limit allocations of net losses due to
considerations as provided in Internal Revenue Section 704(b).
The revised Agreement also provides for K-A SIP and WSLP to
receive .99% and .01%, respectively, of distributable cash from
operations for the five-year period commencing February 12, 1992
and .88% and .12%, respectively, thereafter, until the Unit
Holders have received their preferred return. After the Unit
Holders have received a noncompounded, noncumulative annual cost
return on their capital contributions, as adjusted for certain
capital transactions, K-A SIP and WSLP will receive 14% and 1%,
respectively, of distributable cash from operations for the
five-year period commencing February 12, 1992 and 12.32% and
2.68%, respectively, thereafter. Cash distributions resulting
from the sale of the Partnership's properties are first
allocated 99% to the Unit Holders until they receive a return of
their adjusted capital contributions, as defined. Gains arising
from the sale of the Partnership's properties are allocated
based upon cash distribution from sales. Winthrop Management, an
affiliate of WSLP, served as the management agent for the
properties from August 1, 1991 through March 17, 1996, and
Insignia Management Group, L.P. (which was subsequently acquired
by Apartment Investment and Management Company ("AIMCO")
effective October 1, 1998) served as the management agent for
F-8
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
(Continued)
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
the properties effective March 18, 1996 through October 31, 1998
(see Note 3). Subsequent to October 31, 1998, Winthrop
Management retained management of the property.
Upon liquidation of the Partnership, after payment of, or
adequate provision for, the debts and obligations of the
Partnership, the remaining assets of the Partnership would be
distributed to all partners and Unit Holders with positive
capital accounts in the proportion that the positive balance in
each partner's or Unit Holder's capital account bore to the
aggregate of such positive balances, after taking into account
all capital account adjustments for the Partnership's taxable
year during which such liquidation occurred.
Real Estate
Real estate is carried at cost, adjusted for depreciation and
impairment of value. Depreciation is determined by the
straight-line method over estimated useful lives of
approximately 27 to 30 years for buildings and improvements and
5 to 7 years for personal property. In accordance with Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of," the Partnership records impairment
losses for long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows are
not sufficient to recover the asset's carrying amount. The
impairment loss is measured by comparing the fair value of the
asset to its carrying amount.
Deferred Loan Costs
Loan costs incurred in connection with obtaining financing
amortized on a straight-line basis over the terms of the loans.
Concentration of Credit Risk
The Partnership maintains cash balances at institutions insured
up to $100,000 by the Federal Deposit Insurance Corporation.
Balances in excess of $100,000 are usually invested in money
market accounts, secured by United States Treasury obligations.
Cash balances exceeded these insured levels during the year.
F-9
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
(Continued)
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Replacement Reserves
Replacement Reserves are comprised of Partnership funds held by
the Partnership's mortgage lender's, the use of which are
limited to specific capital or other costs, and total $293,363
and $396,439 at December 31, 1998 and 1997, respectively. The
Agreement requires the General Partner to maintain cash reserves
in an amount equal to at least 1% of the capital contributions
of the Unit Holders.
Rental Income
Rental income is recognized as rents become due. Rental payments
received in advance are deferred until earned. All leases
between the Partnership and the tenants of the property are
operating leases for terms of up to one year.
Income Taxes
Taxable income or loss of the Partnership is recorded in the
income tax returns of its partners. Accordingly, no provision
for income taxes is made in the consolidated financial
statements of the Partnership.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
Disclosures About the Fair Value of Financial Instruments
SFAS No. 107 "Disclosures About the Fair Value of Financial
Instruments", requires that disclosure be made of estimates of
the fair value of each class of financial instrument. Financial
instruments held by the Partnership as of December 31, 1998 and
1997, consist primarily of cash and cash equivalents, short-term
trade receivables and payables, for which the carrying amounts
approximate fair values due to the short-term maturity of these
instruments, and long-term debt. The Partnership estimates the
fair value of its fixed rate mortgage by discounted cash flow
analysis, based on estimated borrowing rates currently available
to the Partnership.
F-10
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
(Continued)
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Net Income (Loss) Allocated to Each Unit
Net income (loss) allocable to each Limited Partner's Unit is
computed using the weighted average number of units outstanding
in each year.
Cash Equivalents
The Partnership considers all highly liquid investments with
original maturities of three months or less at the time of
purchase to be cash equivalents.
Reclassifications
Certain amounts from 1997 have been reclassified to conform to
the 1998 presentation.
Segment Reporting
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which is effective for years beginning
after December 15, 1997. SFAS 131 established standards for the
way that public business enterprises report information about
operating segments in annual financial statements and requires
that those enterprises report selected information about
operating segments in interim financial reports. It also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Partnership
has one reportable segment, residential real estate. The
Partnership evaluates performances based on net operating
income, which is income before depreciation, amortization,
interest and non-operating items.
Note 2 - MORTGAGE PAYABLE
On July 2, 1997, the Partnership refinanced the mortgage on the
Forestbrook property with GMAC Commercial Mortgage Corporation
("GMAC") in the aggregate amount of $5,750,000. The mortgage was
payable in monthly installments of principal and interest of
$45,528, commencing on September 1, 1997 through August 1, 2007
with a balloon payment due of approximately $4,692,000, along
with any accrued but unpaid interest. The new loan bore interest
at the rate of 8.3% per annum. In connection with the
refinancing, GMAC required that the property be transferred to a
single-purpose entity. In this regard, Forestbrook Apartments
was conveyed to SIP Forest Brook Limited Partnership, of which
Forest Brook SIP Inc., a newly formed corporation,
F-11
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
(Continued)
Note 2 - MORTGAGE PAYABLE (Continued)
became the general partner, and the Partnership became the
limited partner. The Partnership is the sole stockholder of
Forest Brook SIP Inc. This conveyance had no effect on the
financial statements. The Forestbrook property was sold on
September 1, 1998 (see Note 6).
On August 27, 1997, the Partnership refinanced the mortgage on
the Sterlingwood property with GMAC in the aggregate amount of
$2,750,000. Monthly installments of principal and interest of
$20,546 are due through September 1, 2007, with a balloon
payment due of approximately $2,206,000, along with any accrued
but unpaid interest. The loan bears interest at the rate of
7.625% per annum. Under agreements with the mortgage lender, the
Partnership is required to make monthly escrow deposits for
taxes, insurance and replacement of project assets. The loan may
be prepaid only with yield maintenance, as defined in the loan
agreement. It is management's estimate that the carrying amount
of the Partnership's mortgage payable approximates its fair
value.
Annual principal payments over the next five calendar years are
as follows:
1999 $ 38,612
2000 45,307
2001 48,885
2002 52,746
2003 56,911
Thereafter 2,455,967
-----------
$ 2,698,428
===========
F-12
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Note 3 - RELATED PARTY TRANSACTIONS
The Partnership has incurred charges and made commitments to
companies affiliated by common ownership and management with
WSLP. Related party transactions with WSLP and its affiliates
include the following:
(a) On October 28, 1997, Insignia Financial Group, Inc.
("Insignia") acquired 100% of the Class B Stock of
First Winthrop Corporation, an affiliate of the
General Partner. On October 1, 1998, Insignia merged
with and into AIMCO. As a result, AIMCO controls the
General Partner of the Partnership.
(b) Investor servicing fees paid or accrued by the
Partnership to affiliates of the General Partner,
totaled $27,426 and $38,028 during the years ended
December 31, 1998 and 1997, respectively, and are
included in management fees.
(c) The Partnership pays to an affiliate of the General
Partner property management fees equal to 5% of gross
revenue, as defined. Management fees paid to an
affiliate were $191,569 and $37,187 for the years
ended December 31, 1998 and 1997, respectively.
(d) In accordance with the Agreement, the General Partner
received $1,689 in cash distributions for the year
ended December 31, 1998.
(e) In connection with the sale of the Partnership's
Forestbrook, Seasons Chase and Pelham Ridge
properties, an affiliate of the General Partner
received sales commissions totaling $228,750 for the
year ended December 31, 1998.
Note 4 - DISTRIBUTIONS
In 1998, the Partnership distributed $10,222,455 ($204.45 per
unit) to Unit Holders. This distribution was comprised of
proceeds from property sales and cash flow from operations. No
cash distributions were made in 1997.
F-13
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Note 5 - RECONCILIATION TO THE INCOME TAX METHOD OF ACCOUNTING
The differences between the accrual method of accounting for
income tax reporting and the accrual method of accounting used
in the consolidated financial statements are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------- -------------
<S> <C> <C>
Net income - consolidated financial statements $ 4,830,162 $ 206,114
Differences resulted from:
Depreciation (189,962) (143,560)
Gain on Sale 137,798 -
Other (14,918) (17,134)
--------------- -------------
Net income - income tax method $ 4,763,080 $ 45,420
=============== =============
Partners' capital - consolidated financial statements $ 1,287,995 $ 6,693,623
Differences resulted from:
Depreciation (1,323,777) (2,902,887)
Provision for investment property write down - 2,150,000
Write-off of loan costs - (120,253)
Syndication costs 2,250,000 2,250,000
Recapitalization of Partnership - (396,817)
Other (21,364) (8,102)
--------------- -------------
Partners' capital - income tax method $ 2,192,854 $ 7,665,564
=============== =============
The difference between investment rental property for income tax
and financial statement purposes for 1998 and 1997 is as
follows:
1998 1997
--------------- -------------
<S> <C> <C>
Investment in rental property - consolidated
financial statements $ 3,094,116 $13,220,474
Investment in rental property - income tax method 1,770,339 11,951,015
--------------- ------------
$ 1,323,777 $ 1,269,459
=============== =============
</TABLE>
F-14
<PAGE>
SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Note 6 - GAIN ON SALE OF PROPERTIES AND EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT
On September 1, 1998, the Partnership sold its Forestbrook
Apartments property to an unaffiliated third party for a
purchase price of $6,550,000. The purchaser of the property
assumed the outstanding debt on the property of $5,685,090.
After closing costs and adjustments, the Partnership received
net proceeds of $715,038. An extraordinary loss on
extinguishment of debt of $205,970, representing the write off
of the unamortized loan costs related to the mortgage note
payable and a disposition fee, has been recorded for the year
ended December 31, 1998. For financial reporting purposes, the
sale resulted in a gain of approximately $1,684,000.
On November 23, 1998, the Partnership sold its Seasons Chase
Apartments property to an unaffiliated third party for a
purchase price of $4,500,000. After closing costs and
adjustments, the Partnership received net proceeds of
$4,302,557. For financial reporting purposes, the sale resulted
in a gain of approximately $1,682,000. The property had
previously been written down to its fair value in 1993.
On November 25, 1998, the Partnership sold its Pelham Ridge
Apartments property to an unaffiliated third party for a
purchase price of $4,200,000. After closing costs and
adjustments, the Partnership received net proceeds of
$3,894,733. For financial reporting purposes, the sale resulted
in a gain of approximately $1,375,000. The property had
previously been written down to its fair value in 1993.
Note 7 - SUBSEQUENT EVENT
The Partnership has entered into an agreement with an
unaffiliated third party to sell the Sterlingwood Apartments
property, the only remaining property in the Partnership, for a
purchase price of $3,200,000. The 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 1999. There can be no
assurance, however, that this sale will be consummated or, if
consummated, that it will be sold at the current sales price.
For financial statement purposes, the sale will result in a gain
in 1999. Upon sale of the remaining property, the Partnership
will be liquidated.
F-15
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Effective January 4, 1999, the Registrant dismissed its prior
Independent Auditors, Reznick, Fedder and Silverman ("Reznick") and retained as
its new Independent Auditors, Imowitz Koenig & Co., LLP ("Imowitz"). Reznick's
Independent Auditors' Report on the Registrant's financial statements for
calendar year ended December 31, 1997, did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. The decision to change Independent
Auditors was approved by the Registrant's Managing General Partner's directors.
During calendar year ended 1996 and 1997 and through January 4, 1999, there were
no disagreements between the Registrant and Reznick on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope of
procedure which disagreements if not resolved to the satisfaction of Reznick,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports.
Effective January 4, 1999, the Registrant engaged Imowitz as its
Independent Auditors. The Registrant did not consult Imowitz regarding any of
the matters or events set forth in Item 304(a)(2) of Regulation S-B prior to
January 4, 1999.
26
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant.
(a) Identification of Directors and Executive Officers.
The Registrant has no officers or directors. The Managing General
Partner manages and controls substantially all of the Registrant's affairs and
has general responsibility and ultimate authority in all matters affecting its
business. As of March 1, 1999, the names of the directors and executive officers
of Eight Winthrop, the Managing General Partner of the Managing General Partner,
and the position held by each of them, are as follows:
<TABLE>
<CAPTION>
Position Held with the Managing General Has Served as a Director or
Name Partner Officer Since
- ---- --------------------------------------- ---------------------------
<S> <C> <C>
Michael L. Ashner Chief Executive Officer and Director 1-96
Thomas C. Staples Chief Financial Officer 1-99
Peter Braverman Executive Vice President and Director 1-96
Carolyn Tiffany Chief Operating Officer and Clerk 10-95
</TABLE>
Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") and the Managing
General Partner since January 15, 1996. From June 1994 until January 1996, Mr.
Ashner was a Director, President and Co-chairman of National Property Investors,
Inc., a real estate investment company ("NPI"). Mr. Ashner was also a Director
and executive officer of NPI Property Management Corporation ("NPI Management")
from April 1984 until January 1996. In addition, since 1981 Mr. Ashner has been
President of Exeter Capital Corporation, a firm which has organized and
administered real estate limited partnerships.
Thomas C. Staples, age 43, has been the Chief Financial Officer of WFA
since January 1, 1999. From March 1996 through December 1998, Mr. Staples was
Vice President/Corporate Controller of WFA. From May 1994 through February 1996,
Mr. Staples was the Controller of the Residential Division of Winthrop
Management.
Peter Braverman, age 47, has been a Vice President of WFA and the
Managing General Partner since January 1996. From June 1995 until January 1996,
Mr. Braverman was a Vice President of NPI and NPI Management. From June 1991
until March 1994, Mr. Braverman was President of the Braverman Group, a firm
specializing in management consulting for the real estate and construction
industries. From 1988 to 1991, Mr. Braverman was a Vice President and
27
<PAGE>
Assistant Secretary of Fischbach Corporation, a publicly traded, international
real estate and construction firm.
Carolyn Tiffany, age 32, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. Ms. Tiffany was a Vice
President in the asset management and investor relations departments of WFA from
October 1995 to December 1997, at which time she became the Chief Operating
Officer of WFA.
One or more of the above persons are also directors or officers of a
Managing General Partner (or Managing General Partner of a Managing General
Partner) of the following limited partnerships which either have a class of
securities registered pursuant to Section 12(g) of the Securities and Exchange
Act of 1934, or are subject to the reporting requirements of Section 15(d) of
such Act: Winthrop Partners 79 Limited Partnership; Winthrop Partners 80 Limited
Partnership; Winthrop Partners 81 Limited Partnership; Winthrop Residential
Associates I, A Limited Partnership; Winthrop Residential Associates II, A
Limited Partnership; Winthrop Residential Associates III, A Limited Partnership;
1626 New York Associates Limited Partnership; 1999 Broadway Associates Limited
Partnership; Nantucket Island Associates Limited Partnership; One Financial
Place Limited Partnership; Presidential Associates I Limited Partnership;
Riverside Park Associates Limited Partnership; Springhill Lake Investors Limited
Partnership; Twelve AMH Associates Limited Partnership; Winthrop California
Investors Limited Partnership; Winthrop Growth Investors I Limited Partnership;
Winthrop Interim Partners I, A Limited Partnership; and Southeastern Income
Properties II Limited Partnership.
Except as indicated above, neither the Registrant nor the Managing
General Partner has any significant employees within the meaning of Item 401(b)
of Regulation S-B. There are no family relationships among the officers and
directors of the Managing General Partner.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Registrant under Rule 16a-3(e) during the Registrant's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Registrant with respect to its most recent fiscal year, the Registrant is not
aware of any director, officer, beneficial owner of more than ten percent of the
units of limited partnership interest in the Registrant that failed to file on a
timely basis, as disclosed in the above Forms, reports required by section 16(a)
of the Exchange Act during the most recent fiscal year or prior fiscal years.
Item 10. Executive Compensation.
The Registrant is not required to and did not pay any compensation to
the officers or directors of Eight Winthrop. Eight Winthrop does not presently
pay any compensation to any of its officers and directors (See "Item 12, Certain
Relationships and Related Transactions").
28
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
No person or group is known by the Registrant to be the beneficial
owner of more than 5% of the outstanding Units as of March 15, 1999. Under the
Registrant's partnership agreement, the voting rights of the Limited Partners
are limited and, in some circumstances, are subject to the prior receipt of
certain opinions of counsel or judicial decisions.
(b) Security Ownership of Management.
As of March 15, 1999, no officers, directors or partners of WFA, WSLP
or Eight Winthrop own any Units of the Registrant.
(c) Changes in Control.
As of March 15, 1999, there exists no arrangement known to the
Registrant the operation of which may at a subsequent date result in a change in
control of the Registrant, other than the following:
In connection with the withdrawal of the Original Managing General
Partner and the substitution of WSLP as the Managing General Partner, WSLP
entered into certain loan arrangements with NLI's predecessor, including the
pledge of its Managing General Partnership interest. (See the 1991 Solicitation
of Consents which is hereby incorporated by reference, and "Item 3, Legal
Proceedings.") In the event NLI was successful in enforcing its remedies under
the security agreement, NLI may claim an interest in the Managing General
Partnership interest of the Registrant. WSLP disputes the validity of the
security interest, and would vigorously defend any action, and raise, among
other defenses, the fact that the transfer of the Managing General Partnership
interest requires the consent of a majority of Unit holders.
Item 12. Certain Relationships and Related Transactions.
Under the Registrant's partnership agreement, the Managing General
Partner and its affiliates are entitled to receive various fees, commissions,
cash distributions, allocations of taxable income or loss and expense
reimbursements from the Registrant.
29
<PAGE>
The following tables sets forth the amounts of the fees, commissions
and cash distributions which the Registrant paid to or accrued for the account
of the Managing General Partner and its affiliates for the years ended December
31, 1997 and 1998:
Type of Compensation 1997 1998
- ---------------------------------- -------- --------
Cash Distribution (1) $ -- $ 1,689
Investor Servicing Fee (2) 38,028 27,426
Sales Commission (3) -- 228,750
Property Management Fees (4) 191,569
TOTAL: $38,000 $447,745
======== ========
- ---------------
<TABLE>
<S> <C>
(1) Equal to .12% of cash flow distributed to all partners of the Registrant.
(2) Equal to 1.0% of gross collected revenues of the Registrant's properties.
(3) Equal to 1.5% of gross sales proceeds from the sale of Forestbrook
Apartments, Seasons Chase Apartments and Pelham Ridge Apartments.
(4) Equal to 5% of gross revenue from the properties.
</TABLE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits - The Exhibits listed in the accompanying Index to
Exhibits are filed as part of this Annual Report and incorporated in this Annual
Report as set forth in said index.
(b) Reports on Form 8-K
A report on Form 8-K was filed on December 2, 1998 with respect to
the sale of the Registrant's Pelham Ridge and Seasons Chase Apartments (Item 2)
A report on Form 8-K was filed on January 8, 1999 with respect to the
change in the Registrant's accountants (Item 4).
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Managing General Partner
By: Eight Winthrop Properties, Inc.,
Its Managing General Partner
By: /s/ Michael L. Ashner
---------------------
Michael L. Ashner
Chief Executive Officer
Date: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature/Name Title Date
<S> <C> <C>
/s/ Michael Ashner Chief Executive Officer March 29, 1999
- ------------------ and Director
Michael Ashner
/s/ Thomas Staples Chief Financial Officer March 29, 1999
- -------------------
Thomas Staples
</TABLE>
31
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Document
- ------- --------
<S> <C>
2.1 Agreement and Addendum to Agreement by and among Glade M. Knight
("Knight"), Ben T. Austin, II ("Austin"), Winthrop Southeast
Limited Partnership ("WSLP") and Investors Savings Bank, F.S.B.
("ISB") (the "Agreement") dated as of August 8, 1991 and effective
as of August 16, 1991. [The exhibits to the Agreement have been
omitted from the Agreement and are listed in the Agreement.]
(Exhibit 2.1)(4)
2.2 Supplemental Agreement by and among WSLP, Knight and ISB (the
"Knight Agreement") dated as of August 8, 1991 and effective as of
August 16, 1991. [The exhibits to the Knight Agreement have been
omitted from the Knight Agreement and are listed in the Knight
Agreement.] (Exhibit 2.2)(4)
2.3 Supplemental Agreement and Addendum to Supplemental Agreement by
and among WSLP, Austin and ISB dated as of August 8, 1991 and
effective as of August 16, 1991. (Exhibit 2.3)(4)
2.4 Employment Agreement by and between WSLP and Austin dated as of
August 8, 1991 and effective as of August 16, 1991. (Exhibit
2.4)(4)
2.5 Supplemental Agreement by and between WSLP and ISB dated as of
August 8, 1991 and effective as of August 16, 1991. (Exhibit
2.5)(4)
3.1 Amended and Restated Certificate and Agreement of Limited
Partnership of Southeastern Income Properties Limited Partnership.
(Exhibit 4.1)(1)
3.2 First Amendment to Amended and Restated Certificate and Agreement
of Limited Partnership of Southeastern Income Properties Limited
Partnership dated as of February 17, 1987. (Exhibit 4.2)(1)
3.3 Second Amendment to Amended and Restated Certificate and Agreement
of Limited Partnership of Southeastern Income Properties Limited
Partnership dated as of March 16, 1987. (Exhibit 4.3)(1)
3.4 Third Amendment to Amended and Restated Certificate and Agreement
of Limited Partnership of Southeastern Income Properties Limited
Partnership dated as of April 30, 1987. (Exhibit 4.4)(1)
3.5 Fourth Amendment to Amended and Restated Certificate and Agreement
of Limited Partnership of Southeastern Income Properties Limited
Partnership dated as of May 28, 1987. (Exhibit 4.1)(2)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
3.6 Fifth Amendment to Amended and Restated Certificate and Agreement
of Limited Partnership of Southeastern Income Properties Limited
Partnership dated as of June 29, 1987. (Exhibit 4.2)(2)
3.7 Sixth Amendment to Amended and Restated Certificate and Agreement
of Limited Partnership of Southeastern Income Properties Limited
Partnership dated as of February 12, 1992. (Exhibit 3.7)(5)
10.1 Apartment Management Agreement, dated February 12, 1992 between
the Registrant and Winthrop Management (for Sterlingwood
Apartments). (Exhibit 10.8) (5)
10.2 Property Acquisition Agreement between Southeastern Income
Properties Limited Partnership and Knight Austin Corporation.
(Exhibit 28.3)(1)
10.3 Real Estate Consulting Agreement between Southeastern Income
Properties Limited Partnership and WFS Realty Corporation.
(Exhibit 28.4)(1)
10.7 Repair Supervisory Contract. (Exhibit 10.10)(3)
10.8 Supervisory Insurance Adjustment Contract. (Exhibit 10.11)(3)
10.9 Mortgage Brokerage and Consulting Agreement. (Exhibit 10.12)(5)
27. Financial Data Schedule 34
</TABLE>
- ------------------------
(1) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's quarterly report on Form 10-Q
for the quarter ended March 30, 1987.
(2) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's quarterly report on Form 10-Q
for the quarter ended June 30, 1987.
(3) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's 1989 Annual Report.
(4) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's current report on Form 8-K on
September 3, 1991.
(5) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's annual report on Form 10-K for
the year ended December 31, 1991.
33
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Southeastern
Income Properties Limited Partnership and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 893,371 <F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,309,649
<DEPRECIATION> (2,215,533)
<TOTAL-ASSETS> 4,282,394
<CURRENT-LIABILITIES> 0
<BONDS> 2,698,428
<COMMON> 0
0
0
<OTHER-SE> 1,287,995
<TOTAL-LIABILITY-AND-EQUITY> 4,282,394
<SALES> 0
<TOTAL-REVENUES> 8,500,195 <F2>
<CGS> 0
<TOTAL-COSTS> 2,897,008
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 536,681
<INCOME-PRETAX> 5,036,132
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,036,132
<DISCONTINUED> 0
<EXTRAORDINARY> (205,920)
<CHANGES> 0
<NET-INCOME> 4,830,162
<EPS-PRIMARY> 95.39
<EPS-DILUTED> 95.39
<FN>
<F1>
Cash includes $293,363 of restricted cash.
<F2>
Includes $4,740,546 of gain on sale of properties.
</FN>
</TABLE>
