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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
--- OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934.
COMMISSION FILE NUMBER: 0-16835 (FORMERLY 33-12125)
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SOUTHEAST ACQUISITIONS I, L.P.
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(Name of issuer in its charter)
Delaware 23-2454443
(State of incorporation) (IRS Employer Identification organization Number))
301 South Perimeter Park Drive
Nashville, Tennessee 37211
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(Address of principal executive offices)
Issuer's telephone no., including area code: (615) 833-8716
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Securities registered pursuant to Section 12(b) of the Act.
Name of each exchange: None
Title of each Class on which registered: Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units $1,000 Per Unit
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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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Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained in this form, and no disclosure will 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-K or any amendment to this
Form 10-K. Yes X No
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
ITEM 1. BUSINESS........................................................................................1
Background......................................................................................1
Material Recent Developments....................................................................1
Employees.......................................................................................1
Competition.....................................................................................2
Trademarks and Patents..........................................................................2
ITEM 2. PROPERTY........................................................................................2
ITEM 3. LEGAL PROCEEDINGS...............................................................................3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................3
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP INTEREST
AND RELATED SECURITY HOLDER MATTERS.............................................................4
ITEM 6. SELECTED FINANCIAL DATA.........................................................................4
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................................4
Background......................................................................................4
Results of Operations...........................................................................5
1997 Compared to 1996...........................................................................5
1996 Compared to 1995...........................................................................5
Liquidity and Capital Resources.................................................................6
Year 2000 Compliance............................................................................6
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................................................6
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE........................................................................6
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.............................................7
ITEM 11. EXECUTIVE COMPENSATION..........................................................................8
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................................................8
Security Ownership of Management................................................................8
Changes in Control..............................................................................8
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................9
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K................................9
(a) Index to Financial Statements...............................................................9
(b) Reports on Form 8-K.........................................................................9
(c) Exhibits (numbered in accordance with Item 601 of Regulation S-K)...........................10
</TABLE>
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PART I
ITEM 1. BUSINESS
Background
Southeast Acquisitions I, L.P. (the "Partnership") was formed
on December 5, 1986, as a Delaware limited partnership. On January 2, 1987, the
Partnership acquired 202.72 acres of unimproved land (the "Property") near
Columbia, South Carolina. The Partnership's primary business objective is to
realize appreciation in the value of the Property by holding the Property for
investment and eventual sale, although there is no assurance that this will be
attained. The Partnership is scheduled to terminate on December 31, 2000.
The Partnership's public offering of 4,225 units of limited
partnership interest ("Units") commenced on May 14, 1987 and terminated on June
5, 1987. As of the close of the offering, the Partnership had raised $4,225,000
through the sale of the 4,225 Units.
The Partnership has been marketing the Property and expects
that it will dispose of the Property as conditions warrant. The remaining
portion of the Property may be sold in a single sale or divided into parcels
which will be sold separately. The timing and manner of sale will be determined
by Southern Management Group, LLC, the General Partner of the Partnership. The
General Partner generally has the right to sell the Property, or portions
thereof, without the consent of the Limited Partners. The Partnership Agreement
provides, however, that a majority in interest of the Limited Partners must
consent to the sale or disposition at one time of 60% or more of the real estate
acreage held by the Partnership as of September 22, 1997, unless the sale or
disposition is being made in connection with the liquidation of the Partnership
pursuant to the Partnership Agreement or the net proceeds of the sale, when
distributed in accordance with the Partnership Agreement, will be sufficient to
provide the Limited Partners with distributions equal to the Acquisition Cost of
the assets sold.
The General Partner believes that the Partnership's cash
reserves will be sufficient to last for at least three more years assuming no
significant increases in expenses. However, if the reserves are exhausted and
the Partnership is unable to borrow funds, the Partnership may have to sell the
Property on unfavorable terms.
Material Recent Developments
At a special meeting of Limited Partners held on November 6,
1997, the Partnership Agreement was amended to (i) extend the term of the
Partnership from its original expiration date of December 31, 1997 to December
31, 2000; (ii) substitute Southern Management Group, LLC for Southeast
Acquisitions, Inc as the general partner of the Partnership; (iii) authorize new
commissions and new management fees for the new General Partner; (iii) give the
new General Partner the exclusive right to sell Partnership property; and (iv)
modify the Partnership Agreement to require that a majority in interest of the
Limited Partners must consent to the sale or disposition at one time of 60% or
more of the real estate acreage held by the Partnership as of September 22, 1997
unless the sale or disposition is being made in connection with the liquidation
of the Partnership pursuant to the Partnership Agreement or the net proceeds of
the sale, when distributed in accordance with the Partnership Agreement, will be
sufficient to provide the Limited Partners with distributions equal to the
Acquisition Cost of the assets sold.
In February, 1998, the Partnership completed its first sale of
a portion of the Property, when approximately 16.92 acres were sold for a cash
price of $22,000 per acre.
Employees
The Partnership presently has no employees. The General
Partner manages and controls the affairs of the Partnership. (See Part III, Item
10, Directors and Executive Officers of the Partnership).
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Competition
The General Partner believes that there is significant direct
competition within a five mile radius of the Property. The Property consists of
approximately 186 acres of undeveloped land situated in the southwest quadrant
of the intersection of Interstate 77 ("I-77") and Killian Road. Killian Road is
one of only three interchanges with I-77 in the Columbia standard metropolitan
statistical area.
Undeveloped land intended for industrial use is abundant in
northern Richland County. The South Carolina Department of Commerce has provided
information on approximately 5,000 acres of available industrial sites in the
I-77 Business Corridor within five miles of the Partnership's Property. The
properties in the area having the largest potential effect on the market for
industrial sites are the Barnett site, the IBM site, the Sony site and
Northpoint Business Park.
The Barnett site is approximately 1,000 acres, served by all
utilities, with minimum site sizes of 50 acres currently being offered at
approximately $10,000 per acre. The IBM site is approximately 1,600 acres, with
portions served with gas, water and rail, which has recently been offered at
$9,000 per acre, based on a purchase of the entire tract. Each of these
properties would require additional improvements prior to being marketed as
business parks. The Northpoint Business Park is an established business park
with a number of existing facilities, an existing infrastructure, and
approximately 380 acres remaining available for sale. Northpoint is served by
all utilities and currently offers sites in excess of 5 acres starting at
$25,000 per acre.
A sale of approximately 105 acres in November 1994 to Bose
Corporation for a manufacturing facility was made at $16,000 per acre. Bose had,
in the past, been presented with the Partnership's property for consideration.
Other than the Bose sale, a sale further south on I-77 to Bi-Lo, Inc.
(approximately 83 acres for $21,000 per acre), and a few sales in Northpoint
Business Park over the past five years, there has been little activity in the
vicinity of the Property.
Absorption of industrial sites by end users has been extremely
slow along the I-77 Business Corridor. Absorption in the Northpoint Business
Park has averaged one lot per year since opening in 1988. Based on recent
history, the remaining lots in Northpoint Business Park and the Sony park should
be sufficient to meet near-term demand for industrial property in northern
Richland County.
The former general partner was marketing the Property and in
March of 1996 the Property was designated as part of the State of South
Carolina's Enterprise Zone. This designation is at least partially the result of
numerous conversations with the Department of Commerce over the past year. By
being awarded this designation, it means that special tax and other incentives
will be available to industrial users who locate on the Partnership's Property.
Trademarks and Patents
The Partnership has no trademarks or patents.
ITEM 2. PROPERTY
Other than the approximately 186 acres of undeveloped land
discussed above, the Partnership owns no other properties.
During 1996, management of the prior general partner
commissioned an appraisal of the Property in an ongoing effort to assess its
current market value and the best ways to market and sell the Property. The
appraiser evaluated a bulk sale of the Property, assuming a phased sell out of
the land, which resulted in a value as of September 30, 1996 of $2,800,000
($13,800 per acre).
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The findings of the appraiser were then supported by the
information gathered as a result of the former general partner's conversations
and meetings with the appraiser, brokers, developers in the area and the South
Carolina Department of Commerce.
The appraised value does not reflect costs, expenses and
commissions, which would be incurred in connection with a sale of the property.
Moreover, appraisals are only an approximation of current market value which can
only be established by an actual sale.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not directly a party to, nor is the
Partnership's Property directly the subject of, any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of Limited Partners was held on November 6,
1997 at which two alternative sets of amendments to the Partnership Agreement
were presented to the Limited Partners for a vote. The matters presented and the
votes cast are set forth below:
<TABLE>
<CAPTION>
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Votes Cast For Votes Cast Against Votes Abstained
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<S> <C> <C> <C>
First Alternative Amendments
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Extend the Partnership until
December 31, 2000 2,856.004 55 77
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Substitute a new general partner 2,688.004 181 119
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Authorize new fees, commissions
and rights to sell Partnership
property for the new general partner 2,631.004 228 129
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Give the new general partner the
exclusive right to sell Partnership
Property 2,673.004 253 62
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Modify the Limited Partners'
rights to consent to certain sales of
Partnership property 2,736.004 110 142
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Second Alternative Amendments
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Extend the Partnership until
December 31, 2000 489.611 1,703.393 795
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Authorize new fees, commissions
and rights to sell Partnership
property for the general partner 384.611 1,748.393 855
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Eliminate the Limited Partners'
rights to consent to certain sales of
Partnership property 390.611 1,772.393 825
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Give the general partner the
exclusive right to sell Partnership
property 389.611 1,823.393 775
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</TABLE>
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP
INTEREST AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units
and it is not anticipated that any will develop in the future. The Partnership
commenced an offering to the public on May 14, 1987 of 4,225 Units of limited
partnership interests. The offering of $4,225,000 was fully subscribed and
terminated on June 5, 1987. As of December 31, 1997, there were 208 limited
partners in the Partnership.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
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For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Operating
Revenues $ 3,430 $ 56,856 $ 1,952 $ 2,032 $ 3,282
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Net (Loss) $ (60,155) $ (954,284)* $ (6,520) $ (17,089) $ (21,080)
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Net (Loss) per
Unit of Limited
Partnership
Interest $ (14.24) $ (225.87) $ (1.54) $ (4.04) $ (4.99)
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Total Assets $2,561,131 $2,611,596* $3,564,268 $3,572,614 $3,590,840
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Long Term
Obligations None None None None None
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Cash
Distributions
Declared per
Unit of Limited
Partnership
Interest None None None None None
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</TABLE>
*Includes a provision for loss on land of $996,645.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Background
The Partnership was formed to acquire and realize appreciation
in the Property by holding it for investment and eventual sale. However, there
can be no assurance that the Partnership's objectives will be realized.
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Results of Operations
The Partnership had no operations from the date of its
formation on December 5, 1986 until January 2, 1987 when it acquired the
Property. Since its acquisition of the Property, the Partnership offered and
sold 4,225 Units of limited partnership interests and obtained the rezoning of
the Property, but has had no other significant operations.
1997 Compared to 1996
The Partnership's activities for fiscal years 1997 and 1996
were primarily focused on selling the Property. During 1997, the Partnership did
not receive any offer and sold no portion of the Property. Revenues for 1997
consisted primarily of interest income, as compared with 1996 when revenues
consisted primarily of proceeds from the sale of timber. There were no timber
sales in 1997. Interest income in 1997 was $3,055 compared with $2,656 in
interest income in 1996. Other income consisted of partnership transfer fees of
$375 in 1997, as compared to $200 in 1996.
Expenses for 1997 included $48,627 of professional and other
fees related to the change in general partner and an amendment of the
partnership agreement in connection with a special meeting of the Limited
Partners in November 1997. There were no such fees in 1996. In addition,
expenses in 1997 included $1,221 in management fees paid to the new General
Partner. The Partnership's other expenses in 1997 consisted primarily of general
and administrative expenses, which decreased by 5.7% from 1996, and real estate
taxes and insurance which were comparable to those paid in 1996.
An appraisal of the Property was commissioned by the former
general partner in 1996 since the last appraisal prior to such time was four
years old. The 1996 appraiser determined the fair value for the Property to be
$2,800,000. The prior appraiser had established a value of $4,055,000. The
former general partner reviewed the assumptions and conclusions of the appraisal
and met with the appraiser, numerous local real estate professionals, the
Central Carolina Economic Development Alliance and the South Carolina Department
of Commerce to confirm the reasonableness of the appraisal. Based upon the
results of these activities, the former general partner concluded that the 1996
appraisal was a reasonable approximation of the Property's market value at the
time. As a result, in 1996 the Partnership adjusted the carrying value of the
Property to reflect its fair value, less estimated disposition costs, in
accordance with generally accepted accounting principles for land that is held
for sale by recording a write-down of $996,645 in 1996.
The 1996 and 1992 appraisals were prepared using essentially
the same assumptions and methodology, but differ as a result of changing market
conditions. In both cases, there were very few sales in the vicinity to be used
as comparable transactions and there was an abundance of land available for
development. There were a few sales of developed land in the area between 1992
and 1996 that enabled the 1996 appraiser to perform some additional analysis of
the Property's value and this analysis led to the conclusion of the lower value.
During the period between 1992 and 1996, based on the Partnership's then
managements' knowledge of the limited number of land sales and overall market
conditions and its disposition plans for the Property, there was no reason to
conclude that there had been a diminution in value.
1996 Compared to 1995
The Partnership's activities for fiscal years 1996 and 1995
were primarily focused on selling the Property. Revenues for 1996 consisted of
interest income of $2,656 compared with $1,727 in 1995 and partnership transfer
fees of $200 in 1996 compared with $225 in 1995. Revenues in 1996 also included
$54,000 of proceeds from sale of timber compared with no revenues from that
activity in 1995.
Expenses for 1996 and 1995 consisted primarily of general and
administrative costs. In 1996 general and administrative costs were $14,020
compared with $7,977 in 1995. The increase in 1996 was due
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primarily to the costs of the appraisal in 1996 and legal fees associated with
investor communications. The Partnership's other expenses consisted of real
estate taxes and insurance which were comparable in 1996 with 1995.
Inflation did not have a material impact on operations during
1997, 1996 and 1995.
Liquidity and Capital Resources
The Partnership had cash reserves of $41,131 at December 31,
1997. In addition, the Partnership sold approximately 17 acres of the Property
in February, 1998 for $22,000 per acre less commissions and closing costs. As a
result, the General Partner believes that the Partnership has sufficient cash
reserves to cover normal Partnership expenses for an additional three years.
However, if additional expenses are incurred or should the Partnership decide to
construct infrastructure improvements to enhance the marketability of the
Property, the reserves may be inadequate to cover the Partnership's operating
expenses. If the reserves are exhausted, the Partnership may have to dispose of
some of the Property or incur indebtedness on unfavorable terms.
Year 2000 Compliance
The Partnership's operations are not dependant in any
meaningful way on computer hardware or software. The General Partner has
commenced a process of determining whether the Partnership's accounting systems
and Limited Partner registration records will be negatively affected by the
so-called "Year 2000 Problem". The "Year 2000 Problem" generally refers to the
inability of computer software or hardware to recognize years in more than two
digits. As a result, the year 2000 would appear as "00" and may be viewed by the
computer as the year 1900. This could cause severe negative consequences in some
computer software and hardware. At this time, the Partnership does not
anticipate that any significant expenditures will be required to ensure that the
Partnership's operations are not negatively affected by the Year 2000 Problem.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the year ended
December 31, 1997 together with the report of the Partnership's independent
auditors, Williams Benator & Libby, LLP, and the financial statements for the
years ended December 31, 1996 and 1995, together with the report of the
Partnership's former independent auditors, Ernst & Young LLP, are included in
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Following the Partnership meeting of November 6, 1997, the new
General Partner, Southern Management Group, LLC, changed auditors from Ernst &
Young LLP to Williams Benator & Libby, LLP. There were no disagreements with the
prior accountants on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure in the two years ended
December 31, 1996 or in the interim periods from January 1, 1997 through
November 20, 1997. The reports of the prior accountant for the fiscal years
ended December 31, 1996 and 1995 did not contain an adverse opinion, disclaimer
of opinion, qualification or modification as to uncertainty, audit scope or
accounting principles. The Partnership did not consult with the new accountants
at any time during the years ended December 31, 1996 and 1995 and the subsequent
interim periods through November 20, 1997 regarding either the application of an
accounting principle, the type of opinion that would be rendered on the
Partnership's financial statements, or any matter that was the subject of
disagreement with the Partnership's prior accountants.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership does not have any directors or officers. The
General Partner manages and controls the affairs of the Partnership and has
responsibility for all aspects of the Partnership's operations. The current
members and executive officers and directors of the General Partner are
identified and described below.
The General Partner is a Tennessee limited liability company
whose members are Richard W. Sorenson, who owns a 51% interest in the General
Partner, and Southeast Venture Corporation, a Tennessee corporation which owns
49% of the General Partner.
Mr. Sorenson, age 71, has over 35 years experience in several
real estate disciplines, including land acquisition and development, development
of office buildings, shopping centers, warehouses and medical facilities.
All of these activities occurred in the southeastern United States.
Mr. Sorenson was President of Phoenix Investment Company
("Phoenix"), a publicly owned, Atlanta based real estate development and
investment firm from 1965 to 1970. Concurrent with his employment at Phoenix, he
was President of First Atlanta Realty Fund, a publicly owned real estate
investment trust. During his tenure with the trust, he served as a Trustee of
the National Association of Real Estate Investment Trusts.
Following his departure from Phoenix in 1970, Mr. Sorenson
became Vice President of Cousins Properties in Atlanta, where he was responsible
for development of office buildings, shopping centers and apartments until 1971.
Until forming Southeast Venture Companies ("SV") in 1979, Mr. Sorenson was an
independent real estate developer.
Mr. Sorenson was co-founder of SV in 1979. In 1992,
substantially all of the assets of SV were sold to Southeast Venture
Corporation.
Mr. Sorenson is a graduate of the Northwestern University
Business School with a major in real estate.
The other member of the General Partner is Southeast Venture
Corporation ("SVC"). The officers and key employees of SVC include the
following:
Paul J. Plummer, age 47. Mr. Plummer serves as director of
project management services for SVC. Mr. Plummer is responsible for management,
team structuring, cost control and scheduling of large scale projects for SVC
including office buildings, medical centers, commercial office buildings,
commercial land ventures and build-to-suit projects. Before joining SVC in 1986,
Mr. Plummer served as a partner and director of design for the Nashville-based
architecture and engineering firm of Gresham, Smith and Partners. In that
capacity he was responsible for the design and planning of over 15 major
projects throughout the United States and Saudi Arabia. Mr. Plummer earned his
bachelor of architecture degree from the University of Kentucky and is a member
of the American Institute of Architects.
Wood S. Caldwell, age 44. Mr. Caldwell is responsible for all
site development activities on behalf of commercial and health care clients of
SVC, including managing all design consultants, permitting, scheduling,
budgeting and construction management. He contributes to SVC's development team
in the areas of land planning, zoning, permitting, engineering and construction.
Before joining SV in 1985, Mr. Caldwell served as a professional engineer for
Gresham, Smith and Partners. As the prime site design engineer for Gresham,
Smith and Partners, Mr. Caldwell produced and coordinated site development plans
for over 50 separate medical facilities in over 40 different communities
throughout the southeast. Mr. Caldwell earned his bachelor of engineering degree
from the Vanderbilt University School of Engineering.
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Axson E. West, age 43. Mr. West serves as vice president of
brokerage services for SVC, specializing in office and industrial leasing,
improved property sales and land disposition for several commercial and
residential projects. Mr. West has sold real estate and real estate securities
since 1980 and, since joining SV in 1988, he has been responsible for the
disposition of land encompassing industrial, office and retail developments. Mr.
West is director of the Nashville Board of Realtors and president elect of the
board's commercial investment division. He received his bachelor of arts degree
from Vanderbilt University and is a Certified Commercial Investment Member, a
designation of the Commercial Investment Real Estate Institute.
Cameron W. Sorenson, age 35. Mr. Sorenson serves as director
of vertical development for SVC. He is primarily responsible for providing
development and project management for the clients of SVC. Prior to assuming
these responsibilities, Mr. Sorenson was project director for two large scale
land development ventures for SVC. Prior to joining SV in 1987, Mr. Sorenson was
with Trust Company Bank in Atlanta, as an officer in the National Division,
managing a credit portfolio in excess of $150 million. He received his bachelor
of science degree in finance from the MacIntyre School of Business at the
University of Virginia. Cameron Sorenson is the son of Richard W. Sorenson, the
individual majority member of the General Partner.
ITEM 11. EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1997, the
Partnership did not pay compensation to any officers of the General Partner. The
Partnership paid to the General Partner a management fee of $1,221 in the fiscal
year ended December 31, 1997. See Item 13 of this report, "Certain Relationships
and Related Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
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Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Units of Limited F&D Development, Inc. $250,000 representing 5.9%
Partnership 102 Goldeneye Drive 250 Units of Limited
Interest Kiawah Island, SC 29455 Partnership Interest
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</TABLE>
As of December 31, 1997, no other person or "group" (as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) was
known by the Partnership to beneficially own more than five percent of the Units
of the Partnership.
Security Ownership of Management
No individual member, or director or officer of a member, of
the General Partner nor such directors or officers as a group, owns any of the
Partnership's outstanding securities. The General Partner owns a general
partnership interest which entitles it to receive 1% of cash distributions until
the Limited Partners have received their cumulative distributions equal to a 10%
non-compounded Cumulative Annual Return of their Adjusted Capital Contribution
plus a return of their Capital Contributions as those terms are defined in the
Partnership Agreement. Thereafter, the General Partner will receive 30% of cash
distributions. The General Partner will share in taxable income to reflect cash
distributions or, to the extent there are losses, 1% of such losses.
Changes in Control
There are no arrangements known to the Partnership that would
at any subsequent date result in a change in control of the Partnership.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From 1987 to November 6, 1997, the Partnership paid $8,100
annually as an administration fee to the former general partner. The cumulative
amount of such fee could not exceed $64,800 and, as of December 31, 1994, fees
charged since inception amounted to $64,800. As of November 6, 1997, the Limited
Partners voted and agreed to pay the new General Partner, Southern Management
Group, LLC, a fee of $1,221 for the period November 6, 1997 through December 31,
1997 and annual fees of $8,100 from January 1, 1998 through December 31, 2000.
Any fee payments will cease at a date when the Partnership is liquidated.
The General Partner will also receive 1% of cash distributions
until the Limited Partners have received (i) cumulative distributions equal to a
10% Cumulative Annual Return on their Adjusted Capital Contributions plus (ii) a
return of their Capital Contributions (as those terms are defined in the
Partnership Agreement). Thereafter, the General Partner will receive 30% of cash
distributions. During 1997, 1996 and 1995 the General Partner received no cash
distributions.
At the special meeting of Limited Partners held on November 6,
1997, the Partnership Agreement was amended to provide that total compensation
paid to all persons, including the General Partner, for the sale of the
Partnership's Property is limited to a competitive real estate commission or
disposition fee not to exceed 10% of the contract price of the sale of the
property, provided that the General Partner or its affiliates would only be
entitled to up to 50% of any such compensation. In addition, the Partnership
Agreement was amended to provide that the General Partner may act as the
exclusive agent for the sale of the Property.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(a) Index to Financial Statements
Report of Independent Auditors for 1997 F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Partners' Equity (Deficit) F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
</TABLE>
<TABLE>
<S> <C>
Report of Independent Auditors for 1996 and 1995 F-11
Balance Sheets F-12
Statements of Operations F-13
Statements of Partners' Equity (Deficit) F-14
Statements of Cash Flows F-15
Notes to Financial Statements F-16
</TABLE>
Schedules have been omitted because they are
inappropriate, not required, or the information is
included elsewhere in the financial statements or
notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership
during the fourth quarter of 1997, except the
following:
Form 8-K, dated November 6, 1997, relating to change
in General Partner.
Form 8-K, dated November 20, 1997, relating to change
in accountants.
Form 8-K/A, dated December 29, 1997, relating to
change in accountants.
- 9 -
<PAGE> 12
(c) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Exhibit Numbers Description Page Number
- --------------------------------------------------------------------------------
<S> <C> <C>
3.1(a) Certificate of Limited Partnership *
- --------------------------------------------------------------------------------
3.1(b) & (4) Restated Limited Partnership **
Agreement
- --------------------------------------------------------------------------------
3.1 First Amendment to Restated Limited E-1
Partnership Agreement
- --------------------------------------------------------------------------------
9 not applicable
- --------------------------------------------------------------------------------
11 not applicable
- --------------------------------------------------------------------------------
12 not applicable
- --------------------------------------------------------------------------------
13 not applicable
- --------------------------------------------------------------------------------
16 not applicable
- --------------------------------------------------------------------------------
18 not applicable
- --------------------------------------------------------------------------------
19 not applicable
- --------------------------------------------------------------------------------
22 not applicable
- --------------------------------------------------------------------------------
24 not applicable
- --------------------------------------------------------------------------------
25 not applicable
- --------------------------------------------------------------------------------
27 Financial Data Schedule
- --------------------------------------------------------------------------------
28 not applicable
- --------------------------------------------------------------------------------
29 not applicable
- --------------------------------------------------------------------------------
</TABLE>
* Incorporated by reference to Exhibit 3.1 filed as part of the Exhibits
to the Partnership's Registration Statement on Form S-18, Registration
No. 33-12125.
** Incorporated by reference to Exhibit 3.2 filed as part of the
Partnership's Registration Statement on Form S-18, Registration No.
33-12125.
- 10 -
<PAGE> 13
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.
SOUTHEAST ACQUISITIONS I, L.P.
a Delaware limited partnership
By: SOUTHERN MANAGEMENT GROUP, LLC
General Partner
By: /s/ Richard W. Sorenson
-------------------------------------
RICHARD W. SORENSON
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard W. Sorenson President, Chief Executive Officer April 15, 1998
- ------------------------------- and Chief Financial Officer of
Southern Management Group, LLC
</TABLE>
- 11 -
<PAGE> 14
REPORT OF INDEPENDENT AUDITORS
Partners
Southeast Acquisitions I, L.P.
Nashville, Tennessee
We have audited the accompanying balance sheet of Southeast Acquisitions I, L.P.
(a Delaware limited partnership) as of December 31, 1997, and the related
statements of operations, partners' equity (deficit), and cash flows for the
year 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 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Southeast Acquisitions I,
L.P. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ Williams Benator & Libby, LLP
Atlanta, Georgia
January 15, 1998
F-1
<PAGE> 15
BALANCE SHEET
SOUTHEAST ACQUISITIONS I, L.P.
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Land held for sale--Note D $ 2,520,000
Cash and cash equivalents 41,131
-----------
$ 2,561,131
===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses--Note B $ 17,739
Partners' equity (deficit)--Note C
General partners (10,764)
Limited partners (4,225 units outstanding) 2,554,156
-----------
2,543,392
-----------
$ 2,561,131
===========
</TABLE>
See notes to financial statements.
F-2
<PAGE> 16
STATEMENT OF OPERATIONS
SOUTHEAST ACQUISITIONS I, L.P.
Year Ended December 31, 1997
<TABLE>
<S> <C>
Interest and other income $ 3,430
Expenses:
Professional and other fees related to change
in general partner and amendment of
partnership agreement 48,627
General and administrative 13,222
Management fee--Note B 1,221
Real estate taxes 301
Insurance 214
63,585
--------
Net loss--Note C:
General partners (602)
Limited partners (59,553)
--------
$(60,155)
--------
Net loss per limited partnership unit $ (14.24)
========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 17
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
SOUTHEAST ACQUISITIONS I, L.P.
Year Ended December 31, 1997
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1, 1997 $(10,162) $ 2,613,709 $ 2,603,547
Net loss for the year ended December 31, 1997 (602) (59,553) (60,155)
-------- ----------- -----------
Balance at December 31, 1997 $(10,764) $ 2,554,156 $ 2,543,392
======== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 18
STATEMENT OF CASH FLOWS
SOUTHEAST ACQUISITIONS I, L.P.
Year Ended December 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(60,155)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in accounts payable and accrued expenses 9,690
--------
NET CASH USED IN
OPERATING ACTIVITIES (50,465)
Cash and cash equivalents at beginning of year 91,131
--------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 41,131
========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
SOUTHEAST ACQUISITIONS I, L.P.
December 31, 1997
NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Southeast Acquisitions I, L.P. ("the Partnership") is a Delaware limited
partnership that was formed to acquire and sell undeveloped land. The
Partnership was formed during December 1986 and received equity contributions
totaling $4,225,000 through the sale of 4,225 limited partnership units during
1987. The Partnership was originally scheduled to terminate on December 31,
1997. However, during November 1997, concurrent with the replacement of the
previous general partner, the term of the Partnership was extended to December
31, 2000.
The Partnership's property consists of approximately 203 acres of undeveloped
land near Columbia, South Carolina, which was acquired during January 1987.
Since its acquisition, the property has been held for sale. There have been no
sales to date.
The following accounting policies are presented to assist the reader in
understanding the Partnership's financial statements:
Basis of Accounting: The Partnership maintains its accounting records on the
accrual basis of accounting. Sales of land are to be recognized upon the closing
of an enforceable sales contract and upon the Partnership's full execution of
its obligations under the contract.
Land Held for Sale: Effective January 1, 1996, the Partnership adopted 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. In
accordance with SFAS No. 121, the Partnership's land held for sale is carried at
the lower of cost or fair value less estimated cost to sell.
The Partnership's land is carried net of a write-down of $996,645 that was
recognized during the year ended December 31, 1996. The carrying value is based
on an independent appraisal, less cost to sell, estimated at 10% of fair value.
Prior to 1996, the Partnership's policy had been to carry the land at the lower
of cost or fair value.
Income Taxes: Federal and state income taxes have not been provided for in the
financial statements. Under existing law, the Partnership is not treated as a
taxable entity. Rather, each partner must include his allocated share of
Partnership income, loss, gain, deduction, and credit in his individual income
tax return. Write-downs of the land's carrying value of $996,645 that have been
recorded for financial statement purposes are not recognized for income tax
purposes until the land is sold.
F-6
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS I, L.P.
NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--Continued
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents: For purposes of reporting cash flows, the Partnership
considers all demand deposits and highly liquid investments purchased with an
original maturity of three months or less which can be readily converted to cash
on demand, without penalty, to be cash equivalents.
NOTE B--RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, the Partnership paid a management fee
of $1,221 to its new general partner, as provided for in the amendment to the
partnership agreement that was adopted during November 1997. The original
partnership agreement provided for management fees, not to exceed $64,000,
during the term of the Partnership. Those fees were fully paid to the previous
general partner during 1994. Accordingly, no management fees were paid to the
previous general partner during the year ended December 31, 1996.
The amended partnership agreement provides for annual management fees of $8,100
to be paid to the new general partner through the year ended December 31, 2000.
As of December 31, 1997, the Partnership owed $5,283 to companies related to the
new general partner for legal fees incurred for the change in general partner
and approval of the amendments to the partnership agreement.
The Partnership agreement provides for reimbursement of expenses incurred by the
general partner related to the administration and operation of the Partnership.
Such reimbursements to the previous general partner totaled $41,214 during the
year ended December 31, 1997. No reimbursements were made to the new general
partner during the year ended December 31, 1997.
F-7
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS I, L.P.
NOTE C--PARTNERSHIP AGREEMENT
In accordance with the partnership agreement (as amended in November 1997), cash
distributions and Partnership profits and losses are to be allocated as follows:
(a) Except for distributions in connection with the liquidation of the
Partnership, cash distributions are to be allocated 1% to the general
partner and 99% to the limited partners, in proportion to their units,
until the limited partners have received distributions equal to a 10%
noncompounded cumulative annual return on their adjusted capital
contributions, as defined ($4,471,458 at December 31, 1997). After the
10% cumulative return has been satisfied, cash distributions are to be
allocated 1% to the general partner and 99% to the return of the
limited partners' capital contributions, in proportion to their units
($4,225,000 at December 31, 1997). Any subsequent cash distributions
are to be allocated 30% to the general partner and 70% to the limited
partners in proportion to their units. Amounts distributed in
connection with the liquidation of the Partnership are to be
distributed in accordance with each partner's adjusted capital account
as defined in the partnership agreement.
(b) Profits and losses are to be allocated as provided in the partnership
agreement. Generally, profits will be allocated to reflect cash
distributions or to offset any negative balances in the partners'
capital accounts. Losses will generally be allocated 99% to the limited
partners, in proportion to their units, and 1% to the general partner,
or to reduce any positive account balances in the partners' capital
accounts. In no event will the general partner be allocated less than
1% of the profits or losses for any year.
Upon dissolution and termination of the Partnership, the general partner is
required to contribute to the capital of the Partnership the lesser of any
negative amount of its capital account, as defined, or 1.01% of the capital
contributions made by the limited partners. Any amount so contributed will be
distributed to the limited partners in proportion to their positive capital
account balances. If, upon dissolution and termination of the Partnership, the
limited partners do not receive distributions which cumulatively total their
initial capital contributions plus a 10% noncompounded cumulative annual return,
the general partner will be required to contribute to the capital of the
Partnership an amount equal to the lesser of cumulative distributions to the
general partner or the amount necessary to provide the limited partners with a
return of the initial capital contribution plus the 10% noncompunded cumulative
annual return.
F-8
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS I, L.P.
NOTE C--PARTNERSHIP AGREEMENT--Continued
Total compensation paid to all persons, including the new general partner, upon
sale of the Partnership's property, is limited to a competitive real estate
commission or disposition fee not to exceed 10% of the contract price. The new
general partner or its affiliates are entitled to receive up to 50% of any such
compensation. Any such commission or disposition fee paid to the general partner
would reduce any distribution which it would otherwise be entitled to pursuant
to the partnership agreement. The general partner or an affiliate may be given
the exclusive right to sell the property.
NOTE D--SUMMARY OF PROPERTY AND ACTIVITY
At December 31, 1997, land consisted of the following:
<TABLE>
<CAPTION>
Gross Amount
at Which Carried at
Description Initial Cost December 31, 1997 Date Acquired
- ------------------------------------------ ------------ ------------------ -------------
<S> <C> <C> <C>
202.72 acres of unimproved land
near Columbia, South Carolina $3,516,645 $2,520,000 January 1987
========== ==========
</TABLE>
There were no liens on the land as of December 31, 1997. At December 31, 1997,
the aggregate carrying value of the land for income tax purposes was $3,516,645.
The difference between the carrying value for financial statement purposes and
income tax purposes resulted from a write-down that was recorded for financial
statement purposes as more fully described in Note A.
F-9
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS I, L.P.
NOTE D--SUMMARY OF PROPERTY AND ACTIVITY--Continued
Land activity for the years ended December 31, 1995, 1996 and 1997 consisted of
the following:
<TABLE>
<S> <C>
Balance at January 1, 1995 $ 3,516,645
Additions -0-
Deductions -0-
-----------
Balance at December 31, 1995 3,516,645
Additions -0-
Deductions--write-down to lower of cost or
fair value, less estimated cost to sell (996,645)
-----------
Balance at December 31, 1996 2,520,000
Additions -0-
Deductions -0-
-----------
Balance at December 31, 1997 $ 2,520,000
===========
</TABLE>
F-10
<PAGE> 24
Southeast Acquisitions I, L.P.
Financial Statements
Years ended December 31, 1996 and 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.........................................................................1
Audited Financial Statements
Balance Sheets.........................................................................................2
Statements of Operations...............................................................................3
Statements of Partners' Equity (Deficit)...............................................................4
Statements of Cash Flows...............................................................................5
Notes to Financial Statements..........................................................................6
</TABLE>
<PAGE> 25
Report of Independent Auditors
To the Partners of
Southeast Acquisitions I, L.P.
We have audited the accompanying balance sheets of Southeast Acquisitions I,
L.P. (a Delaware limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1996. 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 Southeast Acquisitions I, L.P.
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 7, 1997
F-11
<PAGE> 26
Southeast Acquisitions I, L.P.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
--------------------------------------------
<S> <C> <C>
ASSETS
Land, net $ 2,520,000 $ 3,516,645
Cash 91,596 47,623
--------------------------------------------
$ 2,611,596 $ 3,564,268
============================================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accrued expenses $ 8,049 $ 6,437
Partners' equity (deficit):
General (10,162) (619)
Limited (4,225 units authorized, issued and outstanding)
2,613,709 $ 3,558,450
--------------------------------------------
$ 2,611,596 $ 3,564,268
============================================
</TABLE>
See accompanying notes.
F-12
<PAGE> 27
Southeast Acquisitions I, L.P.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Interest and other income $ 2,856 $ 1,952 $ 2,032
Timber revenue 54,000 - -
-------------------------------------------------------------
56,856 1,952 2,032
Expenses:
General and administrative 14,020 7,977 7,653
Management fee - - 8,100
Insurance 184 204 3,082
Real estate taxes 291 291 286
Provision for loss on land 996,645 - -
-------------------------------------------------------------
1,011,140 8,472 19,121
-------------------------------------------------------------
Net loss:
General partner (9,543) (65) (171)
Limited partners (944,741) (6,455) (16,918)
--------------------------------------------------------------
$ (954,284) $ (6,520) $ (17,089)
==============================================================
Net loss per limited partnership unit $ (225.87) $ (1.54) $ (4.04)
==============================================================
</TABLE>
See accompanying notes.
F-13
<PAGE> 28
Southeast Acquisitions I, L.P.
Statements of Partners' Equity (Deficit)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ (383) $ 3,581,823 $ 3,581,440
Net loss (171) (16,918) (17,089)
-------------------------------------------------------------
Balance, December 31, 1994 (554) 3,564,905 3,564,351
Net loss (65) (6,455) (6,520)
-------------------------------------------------------------
Balance, December 31, 1995 (619) 3,558,450 3,557,831
Net loss (9,543) (944,741) (954,284)
-------------------------------------------------------------
Balance, December 31, 1996 $ (10,162) $ 2,613,709 $ 2,603,547
=============================================================
</TABLE>
See accompanying notes.
F-14
<PAGE> 29
Southeast Acquisitions I, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
---------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (954,284) $ (6,520) $ (17,089)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Provision for loss on land 996,645 - -
Changes in operating assets and liabilities:
Accrued expenses 1,612 199 (1,137)
Due to affiliate - (2,025) -
--------------------------------------------------
Net increase (decrease) in cash 43,973 (8,346) (18,226)
Cash, beginning of year 47,623 55,969 74,195
--------------------------------------------------
Cash, end of year $ 91,596 $ 47,623 $ 55,969
==================================================
</TABLE>
See accompanying notes.
F-15
<PAGE> 30
Southeast Acquisitions I, L.P.
Notes to Financial Statements
December 31, 1996
1. DESCRIPTION OF BUSINESS
Southeast Acquisitions I, L.P. is a Delaware Limited Partnership. The General
Partner (Southeast Acquisitions, Inc.) is an indirect wholly owned subsidiary of
The Fidelity Mutual Life Insurance Company (in Rehabilitation).
Fidelity Mutual Life Insurance Company (the Company) was placed into
Rehabilitation, as defined, by the Commonwealth Court of Pennsylvania on
November 6, 1992 and it remains in Rehabilitation as of the report date. The
General Partner does not at this time expect that the Rehabilitation of the
Company will negatively impact the operation of either the General Partner or
the Partnership. The Company's Rehabilitation Plan, originally filed in 1994,
was amended in January 1995 and again in June 1996.
The Partnership purchased approximately 203 acres of undeveloped land near
Columbia, South Carolina from the General Partner on January 2, 1987. The
Property is being marketed for sale.
Per the Partnership Agreement, the Partnership shall exist for a term ending
December 31, 1997, at which time it shall be dissolved. Management is in the
process of soliciting proxies from the partners to approve an extension of the
term of the Partnership and certain other amendments. If the partners do not
approve the extension, the Partnership Agreement provides for the orderly
liquidation of the Partnership's assets and the subsequent dissolution of the
Partnership.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership maintains its accounting records on the accrual basis of
accounting.
LAND
Effective January 1, 1996, the Partnership adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. In accordance with FASB Statement No. 121, land is carried at
the lower of cost or fair value less estimated cost to sell.
F-16
<PAGE> 31
Southeast Acquisitions I, L.P.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LAND (CONTINUED)
The carrying value of land, as disclosed on the balance sheet, is shown net of a
valuation allowance of $996,645, which is the result of a write-down in 1996 to
fair value, as determined by an independent appraisal, less estimated cost to
sell, which is estimated at 10% of fair value. Prior to 1996, the Partnership's
policy has been to carry land at the lower of cost or fair value. In accordance
with FASB Statement No. 121, the loss is accounted for in operations.
An appraisal was commissioned in 1996 as the last appraisal was four years old.
The 1996 appraiser determined the fair value of the Property to be $2,800,000.
The prior appraiser had established a value of $4,055,000. The General Partner
reviewed the assumptions and conclusions of the appraisal and met with the
appraiser, numerous local real estate professionals, the Central Carolina
Economic Development Alliance, and the South Carolina Department of Commerce to
confirm the reasonableness of the appraisal. Based upon the result of these
activities, the General Partner concluded that the 1996 appraisal is a
reasonable approximation of the Property's current market value. As a result,
the Partnership adjusted the carrying value of the Property to reflect its fair
value, less estimated disposition costs, in accordance with generally accepted
accounting principles for land that is held for sale.
The 1996 and 1992 appraisals were prepared using essentially the same
assumptions and methodology, but differ as a result of changing market
conditions. In both cases, there were very few sales in the vicinity to be used
as comparable transactions and there was an abundance of land available for
development. There were a few sales of developed land in the area between 1992
and 1996 that enabled the 1996 appraiser to perform some additional analysis of
the Property's value and this analysis led to the conclusion of the lower value.
During the period between 1992 and 1996, based on management's knowledge of the
limited number of land sales and overall market conditions and its disposition
plans for the Property, there was no reason to conclude that there had been a
diminution in value.
F-17
<PAGE> 32
SOUTHEAST ACQUISITIONS I, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
In conformity with the Internal Revenue Code and applicable state and local tax
statutes, taxable income or loss of the Partnership is required to be reported
in the tax returns of the partners in accordance with the terms of the
Partnership Agreement. Accordingly, no provision has been made in the
accompanying financial statements for any federal, state, or local income tax.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect various amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. RELATED-PARTY TRANSACTIONS
In 1994, the Partnership incurred a management fee of $8,100 to the General
Partner. The cumulative amount of such fee may not exceed $64,800 as provided by
the Partnership Agreement, and in 1994, such fees charged since inception
amounted to $64,800.
4. PARTNERS' EQUITY
The Partnership received cash equity contributions totaling $4,225,000 through
the sale of 4,225 limited partnership units. In accordance with the Partnership
Agreement, cash distributions and profits or losses for each year of the
Partnership shall be allocated as follows:
F-18
<PAGE> 33
SOUTHEAST ACQUISITIONS I, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PARTNERS' EQUITY (CONTINUED)
(a) Cash distributions shall be allocated 1% to the General Partner and
99% to the limited partners in proportion to their units until the
limited partners have received distributions equal to a 10%
noncompounded cumulative annual return on their adjusted capital
contributions, as defined ($4,048,958 at December 31, 1996) plus
their capital contributions ($4,225,000 at December 31, 1996). Any
additional cash distributions shall be allocated 30% to the General
Partner and 70% to the limited partners in proportion to their units.
Amounts distributed in connection with the liquidation of the
Partnership shall be distributed in accordance with each partner's
adjusted capital account as defined in the Partnership Agreement.
(b) Profits and losses shall be allocated as provided in the Partnership
Agreement. Generally, profits will be allocated to reflect cash
distributions or to offset any negative balances in the partners'
capital accounts. Losses will generally be allocated 99% to the
limited partners in proportion to their units and 1% to the General
Partner or to reduce any positive account balances in the partners'
capital accounts. In no event will the General Partner be allocated
less than 1% of the profits or losses for any year.
The Partnership Agreement also provides that upon Partnership dissolution or
termination, the General Partner shall contribute to the capital of the
Partnership the lesser of any negative amount of its capital account, as
defined, or 1.01% of the capital contributions made by the limited partners. Any
amount so contributed shall be distributed to the limited partners in proportion
to their positive capital account balances. Additionally, on dissolution or
termination of the Partnership, if the limited partners do not receive
distributions which cumulatively total their initial capital contributions plus
a 10% noncompounded cumulative annual return, then the General Partner shall
contribute to the capital of the Partnership an amount equal to the lesser of
cumulative distributions to the General Partner or the amount necessary to
provide the limited partners with a return of the initial capital contribution
plus the 10% noncompounded cumulative annual return.
5. TIMBER REVENUE
During 1996, the Partnership entered into an agreement to sell timber. As
provided by the agreement, the Partnership received proceeds from the sale of
timber on the land totaling $54,000.
F-19
<PAGE> 1
EXHIBIT 3.1(C)
FIRST ALTERNATIVE AMENDMENTS
SEA I
FIRST AMENDMENT TO
RESTATED LIMITED PARTNERSHIP AGREEMENT OF
SOUTHEAST ACQUISITIONS I, L.P.
This FIRST AMENDMENT (this "Amendment"), dated as of November 6, 1997
is to the Restated Limited Partnership Agreement (the "Partnership Agreement")
of Southeast Acquisitions I, L.P. (the "Partnership"), dated June 4, 1987, by
and between SOUTHEAST ACQUISITIONS, INC., a Delaware corporation, as general
partner (the "General Partner") and the Persons admitted as limited partners
pursuant to the Partnership Agreement.
WHEREAS, a special meeting (the "Meeting") of the Limited Partners was
duly held on November 6, 1997; and
WHEREAS, at the Meeting a majority in interest of the Limited Partners
have voted to adopt the following Amendments to the Partnership Agreement.
NOW, THEREFORE, the Amendments are adopted and are effective as of
November 6, 1997.
1. Southeast Acquisitions, Inc. is hereby removed as the General
Partner of the Partnership, and Southern Management Group, LLC, a Tennessee
Limited Liability Company, is substituted therefor as successor General Partner
of the Partnership. On and after the date of this Amendment, except as the
context may otherwise require, all references to the General Partner in the
Partnership Agreement shall mean Southern Management Group, LLC.
2. Section 1.3 is amended in its entirety to read as follows:
"1.3. TERM. The Partnership shall exist for a term ending
December 31, 2000, at which time it shall be dissolved, unless sooner
dissolved or terminated as provided in this Agreement (the "Term")."
3. Section 1.4 is hereby amended in its entirety to read as follows:
"1.4. PLACE OF BUSINESS. The principal place of business of
the Partnership shall be at 301 South Perimeter Park Drive, Suite 115,
Nashville, TN 37211, or at another location selected by the General
Partner, who shall give notice of any change to the Limited Partners.
The Partnership may have such additional offices or places of business
as the General Partner may determine."
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<PAGE> 2
4. The first sentence of Section 2.1 is amended in its entirety to read
as follows:
"2.1. GENERAL PARTNER. The General Partner is Southern
Management Group, LLC, a Tennessee Limited Liability Company, 301 South
Perimeter Park Drive, Suite 115, Nashville, Tennessee."
5. Section 4.2(a) is amended by adding at the end of the Section the
following:
"(xi) Reserve to itself or an Affiliate or enter into a
contract for the exclusive right to sell or exclusive employment to
sell property for the Partnership."
6. Section 4.3(b) is hereby amended in its entirety to read as follows:
"(b) Without the Consent of a majority in interest of the
Limited Partners, the General Partner shall not have the authority to:
(i) sell or otherwise dispose of at one time all or
substantially all the assets of the Partnership, except that
the General Partner may sell such assets without such consent
(A) in connection with the liquidation of the Partnership
under Section 6.3 or (B) if the net proceeds of such sale,
when distributed in accordance with Section 3.1, will be
sufficient to provide the Limited Partners with distributions
equal to the Acquisition Cost of the assets sold."
7. Section 4.3(c)(i) is deleted in its entirety and clauses 4.3(c)(ii)
through (iv) are hereby renumbered 4.3 (c) (i) through (iii) respectively.
8. Section 4.5(a) is amended in its entirety as follows:
"4.5. COMPENSATION OF GENERAL PARTNER. (a) For the services
and activities to be performed by the General Partner in connection
with the administration and management of the Partnership and the
Property from November 6, 1997 to the end of the Term, the General
Partner shall receive a management fee of $8,100 per year (prorated for
a portion of a year) during the Term of the Partnership. The management
fee shall be paid to the General Partner for such services on
conclusion of each calendar quarter. If the Partnership does not have
sufficient cash to pay the management fee for any quarter, such fee
shall be accrued (without interest) as a debt of the Partnership,
payable out of Sale or Financing proceeds prior to any Partner
receiving his distributions in accordance with the Agreement."
9. A new Section 4.5(d) shall be added to the Partnership Agreement as
follows:
"(d) The General Partner or its Affiliates may receive up to
one-half of the competitive real estate commission or disposition fee
(that real estate or brokerage commission or disposition fee paid for
the purchase or sale of property which is
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<PAGE> 3
reasonable, customary and competitive in light of the size, type and
location of the property) with respect to sales of Partnership property
following November 6, 1997 which are not under contract as of such
date. The total compensation paid to all Persons for the sale of
Partnership property shall be limited to a competitive real estate
commission or disposition fee not to exceed 10% of the contract price
for the sale of the property. The commission or disposition fee shall
be paid upon sale of the property prior to any distribution to the
Partners in accordance with this Agreement; provided that the amount of
any such commission or disposition fee paid to the General Partner
shall reduce any distribution to which it would otherwise be entitled
pursuant to this Agreement."
10. Section 11.1 is amended by adding the following definition as the
first definition in the Section:
"Acquisition Cost" with respect to a Partnership asset means
the price originally paid by the Partnership to acquire the asset,
including the value of any mortgages or liens on the asset assumed by
the Partnership at the time of acquisition, excluding points and
prepaid interest"
and by adding the following definition following the definition of "Agreement":
"all or substantially all the assets of the Partnership" means
60% or more of the real estate acreage held by the Partnership as of
September 22, 1997."
11. Except as amended hereby, the Partnership Agreement shall remain in
full force and effect.
12. Terms not defined herein which are defined in the Partnership
Agreement shall have the same meanings herein.
13. This Amendment and the rights and obligations of the Partners
hereunder shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
therein, without application bf the principles of conflicts of laws of. such
state.
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<PAGE> 4
IN WITNESS WHEREOF, this Amendment has been executed by the parties set
forth below as of the date first above written.
GENERAL PARTNER SOUTHEAST ACQUISITIONS, INC.
By /s/ Arthur W. Mullen
---------------------------
Name:
Title:
SUCCESSOR GENERAL PARTNER SOUTHERN MANAGEMENT GROUP, LLC.
By /s/ Richard Sorenson
---------------------------
Name:
Title:
LIMITED PARTNERS LIMITED PARTNERS
By /s/ Arthur W. Mullen
---------------------------
Name:
Title:
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810994
<NAME> SOUTHEAST ACQUISITIONS I, L.P.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 41,131
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,520,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,561,131
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,543,392
<TOTAL-LIABILITY-AND-EQUITY> 2,561,131
<SALES> 0
<TOTAL-REVENUES> 3,430
<CGS> 0
<TOTAL-COSTS> 63,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (60,155)
<INCOME-TAX> 0
<INCOME-CONTINUING> (60,155)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (60,155)
<EPS-PRIMARY> (14.24)
<EPS-DILUTED> (14.24)
</TABLE>
