SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File Number 0-17461
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Virginia 54-2839837
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
One International Place, Boston, MA 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 330-8600
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30 ,1996 September 30, 1995 September 30, 1996 September 30, 1995
Income
<S> <C> <C> <C> <C>
Rental $ 948,045 $ 1,006,604 $ 2,855,058 $ 2,965,517
Interest Income 4,141 6,805 18,120 17,859
Other 110,487 108,738 285,787 313,900
1,062,673 1,122,147 3,158,965 3,297,276
Expenses
Leasing 63,926 79,159 174,519 230,371
General and administrative 67,723 54,854 220,846 165,955
Management Fees 71,666 62,772 191,339 185,373
Utilities 120,195 80,290 309,697 215,930
Repairs and Maintenance 261,748 191,894 695,712 566,338
Insurance 40,720 41,155 107,596 125,307
Taxes 88,954 72,007 226,635 214,533
Total Operating Expenses 714,932 582,131 1,926,344 1,703,807
Other Expenses
Partnership expense 5,916 17,444 58,649 53,653
Interest Expense 188,390 190,579 566,817 573,325
Depreciation and amortization 234,961 220,799 696,113 673,219
TOTAL EXPENSES 1,144,199 1,010,953 3,247,923 3,004,004
Net income (loss) $ (81,526) $ 111,194 $ (88,958) $ 293,272
Net income (loss) allocated to General Prt. $ (815) $ 1,112 $ (890) $ 2,934
Net Income (loss) allocated to $ (80,711) $ 94,515 $ (88,068) $ 249,280
Limited Partner Unit Holders
Net income (loss) allocated to Special $ - $ 15,567 $ - $ 41,058
Limited Partner
Net income (loss) to each unit $ (2.25) $ 2.64 $ (2.46) $ (6.96)
Weighted average number of units outstanding 35,801 35,801 35,801 35,801
</TABLE>
The accompanying notes are an integral part of these financial statements.
BALANCE SHEETS
<TABLE>
September 30, 1996 December 31, 1995
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Investment in rental property
Land $ 2,664,225 $ 2,664,225
Buildings and building improvements 17,744,666 17,744,666
Personal Property 3,679,713 3,493,076
24,088,604 23,901,967
Less Accumulated depreciation 8,201,371 7,545,031
15,887,233 16,356,936
Cash 590,486 627,142
Tenant security deposits 116,713 237,327
Loan cost, net accumulated amortization of
$196,956 and $160,515 92,108 128,164
Other assets 622,243 364,787
1,421,550 $1,357,420
Total Assets $ 17,308,783 $ $17,714,356
LIABILITIES AND PARTNERS' CAPITAL
Liabilities applicable to investment in rental pr$ 8,241,479 $ 8,318,589
Mortgages payable
Other liabilities
Accounts payable 46,917 91,185
Accrued interest payable 63,955 63,955
Tenant security deposits 99,610 117,671
Other liabilities 164,454 65,710
Total Liabilities 8,616,415 8,657,110
Partners' Capital
Limited Partner Unit Holders 50,000 units
authorized, 35,801 outstanding June 30, 1996
and December 31, 1995 10,059,593 10,420,822
Special Limited Partner (1,359,378) (1,356,646)
General Partner (7,847) (6,930)
Total Partners' capital 8,692,368 9,057,246
Total Liabilities and Partners' Capital $ 17,308,783 $ 17,714,356
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
STATEMENTS OF CASH FLOWS
<TABLE>
Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995
(Unaudited) (Unaudited)
Cash flow from operating activities:
<S> <C> <C>
Net income (loss) $ (88,958) $ 293,272
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 692,781 673,218
Changes in assets and liabilities:
Decrease (increase) in tenant security depos 102,553 (45,536)
Increase in other assets (257,456) (142,659)
Decrease in accounts payable (44,268) (79,713)
Increase in other liabilities 98,744 175,476
Net cash provided by operating activities 503,396 874,058
Cash flows from investing activities
Investment in rental property (187,022) (245,632)
Net cash used by investing activities (187,022) (245,632)
Cash flows from financing activities
Principal payments on mortgage note (77,110) (70,601)
Cash distributions paid to partners (275,920) (454,022)
Net cash used in financing activities (353,030) (524,623)
Net increase in cash (36,656) 103,803
Cash, beginning 627,142 475,375
Cash, ending $ 590,486 $ 579,178
Supplemental disclosure of cash flow information $ 566,817 $ 573,325
Cash paid during the year of interest
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
For the Nine Months Ended Special Partner Total
September 30, 1996 and 1995 General Limited Unit Partners'
(UNAUDITED) Partner Partner Holders Capital
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ (10,790) $ (1,405,492) $ 10,692,221 $ 9,275,939
Distributions paid (45) (4,496) (449,481) (454,022)
Net income 2,934 41,058 249,280 293,272
Balance, September 30, 1995 $ (7,901) $ (1,368,930) $ 10,492,020 $ 9,115,189
Balance, December 31, 1995 $ (6,930) $ (1,356,646) $ 10,420,822 $ 9,057,246
Distributions paid (27) (2,732) (273,161) (275,920)
Net loss (890) - (88,068) (88,958)
Balance, September 30, 1996 $ (7,847) $ (1,359,378) $ 10,059,593 $ 8,692,368
</TABLE>
Note: Units of Limited Partnership Interest outstanding for both September 30,
1996 and September 30, 1995 were 35,801.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
1. ACCOUNTING AND FINANCIAL REPORTING POLICIES
The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. The Registrant's accounting and
financial reporting policies are in conformity with generally accepted
accounting principles and include adjustments in interim periods considered
necessary for a fair presentation of the results of operations. Certain
information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Registrant's latest annual report on Form 10-K.
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, 1996.
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
Property management and fees paid or accrued by the Partnership to Winthrop
Management, an affiliate of the General Partners, totaled $76,410 and $179,645
during the nine months ended September 30, 1996 and 1995, respectively. On March
15, 1996 the Partnership terminated Winthrop Management as the managing agent
effective March 18, 1996 and appointed an unaffiliated third party to assume
management of the properties.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership receives rental income from its properties and is responsible
for operating expenses, administrative expenses, capital improvements and debt
service payments. The Partnership's properties are leased to tenants who are
subject to leases of up to one year.
As of September 30, 1996, the Partnership's unrestricted cash balance had
decreased to $590,486 from $627,142 at December 31, 1995. The decrease in cash
was due to $503,396 of cash generated from operating activities which was more
than offset by $187,022 of cash used in investing (investment in rental
property) activities and $353,030 of cash used in financing activities during
the nine months ended September 30, 1996.
It is expected that future rental revenue and other income from the
Partnership's properties will be sufficient to cover all administrative expenses
of the Partnership and all operating expenses and debt service of the
properties, as well as the continued costs of any capital improvement program.
As a result of the continuance of the capital improvement program, it is
expected that cash available for distribution will remain limited. Future
distribution levels, if any, will be reviewed on a quarterly basis.
The Partnership has invested, and expects to continue to invest cash in money
market instruments until required for partnership purposes. As of September 30,
1996, the Partnership has $132,023 in reserves held by the mortgage lender, the
use of which is restricted for capital improvements to Hunters Creek Apartments.
Therefore, as of June 30, 1996, the Partnership has total reserves of $722,508
which is expected to be sufficient to satisfy working capital requirements for
the Partnership. The Partnership, as required by the Partnership Agreement, must
retain as working capital reserves an amount equal to at least 1% of capital
contributions of the Unit Holders. The Partnership spent $187,022 on capital
improvements during the first nine months of 1996 compared to $245,632 in the
first nine months of 1995.
Results of Operations
The Partnership incurred a net loss of $88,958 for the nine months ended
September 30, 1996, compared to net income of $293,272 for the nine months ended
September 30, 1995. The net loss for the three months ended September 30, 1996
was $81,526 compared to net income of $111,194 for the same period in 1995. The
decreases were attributable to decreased revenues and increased operating
expenses.
The Partnership's total revenue decreased by 4.2% for the nine months of 1996
compared to the nine months of 1995. Rental income decreased by 3.7% to
$2,855,058 in 1996 from $2,965,517 in 1995. Average rents at the Partnership's
four properties have increased 6.0% during the nine months, however the combined
average occupancy for all four properties was 86% compared to 94% in the nine
months of 1995. Decreases in average occupancy occurred at each property as
follows: Greenbryre from 95% to 92%, Hunter's Creek from 92% to 81%, St.
Michael's from 93% to 80%, and Copper Croft from 96% to 95%. Other income for
the nine months ended September 30, 1996 was $285,787 compared to $313,900 for
the same period in 1995. The decrease was primarily the result of decreased
corporate unit revenues at St. Michaels.
Expenses of operating the properties increased by $222,587 during the nine month
period ended September 30, 1996 compared to the nine month period ended
September 30, 1995 primarily due to an increases in utilities and various
repairs and maintenance expense categories. The increase in utility costs of
$93,767 was the result of increased gas charges of $42,774; water and sewer
charges of $26,177 and increased electric charges of $23,598. The repairs and
maintenance expense increase by $129,374 due to increased carpet repairs of
$58,800, maintenance supplies of $31,000 and payroll costs $19,000. The increase
in general and administrative expense was offset by the decrease in leasing
expense which resulted primarily from a reallocation of payroll expenses between
two categories.
Other expenses increased by $21,382 or 1.6% for the nine months ended September
30, 1996. Depreciation and amortization expenses increased as a result of newly
capitalized assets during 1996. Partnership expenses increased due to higher
reimbursable expenses.
The results of operations in future quarters may differ from the results of
operations for the quarter and nine months ended September, 1996, due to
inflation and changing economic conditions which could affect occupancy levels,
rental rates and operating expenses.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the three months
ended September 30, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHEASTERN INCOME PROPERTIES II
LIMITED PARTNERSHIP
By: Winthrop Southeastern Limited Partnership
Its General Partner
By: Eight Winthrop Properties, Inc.,
Its General Partner
Date: November 14, 1996 By: Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
Date: November 14, 1996 By: Edward V. Williams
Edward V. Williams
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
nine month period ending September 30, 1996 and is
qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000822983
<NAME> SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 590,486
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,329,442
<PP&E> 24,088,604
<DEPRECIATION> (8,201,371)
<TOTAL-ASSETS> 17,308,783
<CURRENT-LIABILITIES> 210,482
<BONDS> 0
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0
0
<OTHER-SE> 8,692,368
<TOTAL-LIABILITY-AND-EQUITY> 17,308,783
<SALES> 0
<TOTAL-REVENUES> 3,158,965
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,681,106
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 566,817
<INCOME-PRETAX> (88,958)
<INCOME-TAX> 0
<INCOME-CONTINUING> (88,958)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,958)
<EPS-PRIMARY> (2.46)
<EPS-DILUTED> (2.46)
</TABLE>
