<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
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 02142-1493
---------------------------------------- -----------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
----------------------
Indicate by check mark whether 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
FORM 10-QSB MARCH 31, 1999
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------- ---------------------
<S> <C> <C>
Assets
Real Estate, at cost:
Land $ 352,825 $ 352,825
Buildings and building improvements 4,286,232 4,286,062
Personal property 686,756 670,762
--------------------- ---------------------
5,325,813 5,309,649
Less: Accumulated depreciation (2,258,926) (2,215,533)
--------------------- ---------------------
3,066,887 3,094,116
Other Assets:
Cash and cash equivalents 596,311 600,008
Tenant security deposits 14,588 75,691
Mortgage escrow deposits 34,370 43,446
Reserve for replacements 297,413 293,363
Deferred loan costs, net of accumulated amortization
of $20,144 (1999) and $16,964 (1998) 107,080 110,260
Other assets 95,020 65,510
--------------------- ---------------------
Total Assets $ 4,211,669 $ 4,282,394
===================== =====================
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 2,691,605 $ 2,698,428
Prepaid rent 1,661 1,923
Tenant security deposits payable 13,059 13,175
Accounts payable and accrued expenses 237,667 280,873
--------------------- ---------------------
Total Liabilities 2,943,992 2,994,399
--------------------- ---------------------
Partners' Capital:
Special limited partner's deficit (437,379) (434,534)
Limited partner unit holders' capital -
50,000 units authorized and outstanding 1,694,989 1,712,259
General partner's capital 10,067 10,270
--------------------- ---------------------
Total Partners' Capital 1,267,677 1,287,995
--------------------- ---------------------
Total Liabilities and Partners' Capital $ 4,211,669 $ 4,282,394
===================== =====================
</TABLE>
See notes to consolidated financial statements.
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, March 31,
1999 1998
--------------------- --------------------
<S> <C> <C>
Revenues:
Rental $ 193,034 $ 1,054,785
Interest income 4,941 7,040
Other income 5,749 55,295
--------------------- --------------------
Total revenue 203,724 1,117,120
--------------------- --------------------
Expenses:
Leasing 3,045 27,109
General and administrative 18,143 81,506
Management fees 3,182 64,197
Utilities 11,636 125,085
Repairs and maintenance 31,392 194,224
Insurance 8,196 42,291
Taxes 15,283 79,359
--------------------- --------------------
Total operating expenses 90,877 613,771
Other Expenses:
Partnership expenses 35,218 46,498
Interest expense 51,374 178,170
Depreciation and amortization 46,573 220,100
--------------------- --------------------
Total expenses 224,042 1,058,539
--------------------- --------------------
Net (loss) income $ (20,318) $ 58,581
===================== ====================
Net (loss) income allocated:
Special Limited Partner $ (2,845) $ 8,201
===================== ====================
Limited Partners $ (17,270) $ 49,794
===================== ====================
General Partner $ (203) $ 586
===================== ====================
Net (loss) income allocated per limited partner unit:
Net (loss) income $ (0.35) $ 1.00
===================== ====================
</TABLE>
See notes to consolidated financial statements.
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Consolidated Statement of Partners' Capital (Unaudited)
<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 - January 1, 1999 50,000 $ (434,534) $ 1,712,259 $ 10,270 $ 1,287,995
Net loss - (2,845) (17,270) (203) (20,318)
----------------- ----------------- ------------------ ----------------- ------------------
Balance - March 31, 1999 50,000 $ (437,379) $ 1,694,989 $ 10,067 $ 1,267,677
================= ================= ================== ================= ==================
</TABLE>
See notes to consolidated financial statements.
4 of 11
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, March 31,
1999 1998
--------------------- --------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $ (20,318) $ 58,581
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation 43,393 213,100
Amortization 3,180 7,000
Changes in assets and liabilities:
Tenant security deposits 61,103 3,890
Mortgage escrow deposits 9,076 (25,050)
Other assets (29,510) (40,660)
Prepaid rent (262) 4,852
Accrued interest payable - 41,000
Tenant security deposits payable (116) (3,289)
Accounts payable and accrued expenses (43,206) (510)
--------------------- --------------------
Net cash provided by operating activities 23,340 258,914
--------------------- --------------------
Cash Flows From Investing Activities:
Additions to buildings and improvements (16,164) (75,663)
Changes in replacement reserves (4,050) (19,176)
--------------------- --------------------
Cash used in investing activities (20,214) (94,839)
--------------------- --------------------
Cash Flows From Financing Activities:
Principal payments on mortgage notes (6,823) (15,526)
--------------------- --------------------
Cash used in financing activities (6,823) (15,526)
--------------------- --------------------
Net (decrease) increase in cash and cash equivalents (3,697) 148,549
Cash and cash equivalents, beginning of period 600,008 1,171,707
--------------------- --------------------
Cash and cash equivalents, end of period $ 596,311 $ 1,320,256
===================== ====================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 34,271 $ 137,170
===================== ====================
</TABLE>
See notes to consolidated financial statements.
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The 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. All adjustments are of a normal recurring nature. 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 10-KSB. Certain amounts have been reclassified to
conform to the March 31, 1999 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, 1999.
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
Investor servicing fees paid or accrued by the Partnership to
affiliates of the General Partner totaled $3,182 and $8,693 during
the three months ended March 31, 1999 and 1998, respectively, and are
included in management fees.
4. Sales Contract
The Partnership has entered into an agreement with an unaffiliated
third party to sell the Sterlingwood Apartments property, the
Partnership's only remaining property, 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.
Upon sale of the remaining property, the Partnership will be
liquidated.
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
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.
This item should be read in conjunction with the consolidated
financial statements and other items contained elsewhere in the
report.
Liquidity and Capital Resources
The Partnership receives rental income from its property and is
responsible for operating expenses, administrative expenses,
capital improvements and debt service payments. The Partnership's
remaining property, which is a residential apartment complex
located in Virginia, is leased to tenants who are subject to leases
of up to one year.
During the three months ended March 31, 1999, rental revenue and
other income from the property, along with interest income from the
Partnership's short-term investments, was sufficient to cover all
operating expenses and debt service of the property and all
administrative expenses of the Partnership, as well as all capital
improvements made to the property during the period. As of March
31, 1999, the Partnership's unrestricted cash balance had decreased
to $596,311 from $600,008 at the end of 1998. The decrease was due
to $23,340 of net cash provided by operating activities, which was
offset by $20,214 of cash used in investing activities and $6,823
of cash used for mortgage principal reductions.
Net cash provided by operating activities increased primarily due
to the timing of receipt and payment of various activities. Cash
used in investing activities consisted of $16,164 of improvements
to real estate as well as funding replacement reserves in the
amount of $4,050.
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. Upon sale of the remaining property, the
Partnership will be liquidated.
7 of 11
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
(Continued)
Liquidity and Capital Resources (Continued)
The Partnership has invested, and expects to continue to invest,
available amounts in money market instruments until required for
Partnership purposes. In addition, the Partnership has replacement
reserves of $297,413 held by the mortgage lender for the
Sterlingwood Apartments. These funds are restricted under the terms
of the mortgage loan for this property. The Partnership's total
cash balance, both restricted and unrestricted, as of March 31,
1999, was therefore $893,724, 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.
Year 2000 Issue
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 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 costs in connection with the
upgrade of those systems requiring remediation. It is expected that
all systems will be remediated, tested and implemented during the
first half of 1999.
8 of 11
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
(Continued)
Year 2000 Issue (Continued)
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.
Results of Operations
The Partnership generated a net loss of $20,318 for the three
months ended March 31, 1999, as compared to net income of $58,581
for the three months ended March 31, 1998. The net loss for the
three months ended March 31, 1999 was due to the sale of the
Forestbrook, Pelham Ridge and Seasons Chase properties in 1998.
Rental revenue decreased for the three months ended March 31, 1999
to $193,034 from $1,054,785 in 1998, as a result of property sales.
With respect to the remaining property, rental revenues increased
by approximately $23,000 due to higher average occupancy. Overall,
average rents for the Partnership's remaining property remained
stable, while average occupancy increased from 83% in 1998 to 93%
in 1999. Interest income decreased due to lower average cash
balances available for investment. Other income decreased in 1999,
as compared to 1998, due to property sales in 1998 resulting in
decreases in lease termination fees, forfeited deposits and late
fees.
The Partnership's operating expenses decreased for the three months
ended March 31, 1999 to $90,877 from $613,771 in 1998. With respect
to the remaining property, operating expenses decreased in 1999 to
$90,877 from $109,985, primarily due to a decrease in management
fees and general and administrative expenditures, while the
remaining operating expenses remained relatively stable.
9 of 11
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports of Form 8-K:
No report on Form 8-K was filed during the period.
10 of 11
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SOUTHEASTERN INCOME PROPERTIES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHEASTERN INCOME PROPERTIES
LIMITED PARTNERSHIP
By: Winthrop Southeastern Limited Partnership
Its General Partner
By: Eight Winthrop Properties, Inc.,
Its General Partner
By: /s/ Michael L. Ashner
-----------------------------------------
Michael L. Ashner
Chief Executive Officer
By: /s/ Thomas Staples
-----------------------------------------
Thomas Staples
Chief Financial Officer
Dated: May 13, 1999
11 of 11
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 893,724 <F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,325,813
<DEPRECIATION> (2,258,926)
<TOTAL-ASSETS> 4,211,669
<CURRENT-LIABILITIES> 0
<BONDS> 2,691,605
<COMMON> 0
0
0
<OTHER-SE> 1,267,677
<TOTAL-LIABILITY-AND-EQUITY> 4,211,669
<SALES> 0
<TOTAL-REVENUES> 198,783
<CGS> 0
<TOTAL-COSTS> 137,451
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,374
<INCOME-PRETAX> (20,318)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,318)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,318)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
<FN>
<F1>
Cash includes $297,413 of restricted cash.
</TABLE>
