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 June 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>
<TABLE>
BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1996 1995
(Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment in rental property
<S> <C> <C>
Land $ 2,664,225 $ 2,664,225
Buildings and building improvements 17,744,666 17,744,666
Personal property 3,623,868 3,493,076
----------- -----------
24,032,759 23,901,967
Less accumulated depreciation (7,981,429) 7,545,031
------------ -----------
16,051,330 16,356,936
----------- -----------
Cash 478,834 627,142
Tenant security deposits 245,899 237,327
Loan cost, net accumulated amortization of
$185,269 and $160,515 103,410 128,164
Other assets 532,378 364,787
------------ ------------
1,360,521 1,357,420
----------- -----------
Total assets $17,411,851 $17,714,356
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities applicable to investment in rental property
Mortgages payable $ 8,267,731 $ 8,318,589
Other liabilities
Accounts payable 60,522 91,185
Accrued interest payable 63,955 63,955
Rents received in advance 17,923 26,919
Tenant security deposits 100,513 117,671
Other liabilities 127,313 38,791
------------- -------------
Total liabilities 8,637,957 8,657,110
------------ ------------
Partners' Capital
Limited partner unit holders 50,000 units authorized,
35,801 outstanding June 30, 1996 and December 31, 1995 10,140,303 10,420,822
Special Limited Partner (1,359,378) (1,356,646)
General Partner (7,031) (6,930)
------------ ------------
Total partners' capital 8,773,894 9,057,246
------------ ------------
Total liabilities and partners' capital $ 17,411,851 $ 17,714,356
============ ============
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended
June 30, June 30,
1996 1995
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flow from operating activities
Net income (loss) $ (7,432) $ 182,077
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 436,398 427,665
Amortization 24,754 24,754
Increase in tenant security deposits (net) (25,730) (39,177)
Increase in other assets (167,591) (77,395)
Increase in accounts payable (30,663) (53,828)
(Decrease)\increase in rents received in advance (8,996) 17,080
Increase in other liabilities 88,522 98,720
----------- ----------
Net cash provided by operating activities 309,262 579,896
------- ----------
Cash flows from investing activities
Investment in rental property (130,792) (163,596)
---------- -----------
Net cash used by investing activities (130,792) (163,596)
---------- -----------
Cash flows from financing activities
Distributions accrued and paid to partners (275,920) (294,002)
Payment on mortgage notes (50,858) (46,538)
---------- -----------
Net cash used in financing activities (326,778) (340,540)
---------- -----------
Net increase in cash (148,308) 75,760
Cash, beginning 627,142 475,375
----------- -----------
Cash, ending $ 478,834 $ 551,135
========== ===========
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 378,427 $ 382,746
========== ===========
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Income
<S> <C> <C> <C> <C>
Rental $ 951,308 $ 995,503 $ 1,907,013 $1,958,913
Interest income 6,752 5,959 13,979 11,054
Other 108,078 90,216 175,300 205,162
---------------------------------------------------------------------
1,066,138 1,091,678 2,096,292 2,175,129
----------------------------------------------------------------------
Expenses
Leasing 51,418 70,977 110,593 151,212
General and administrative 97,202 54,210 153,123 111,101
Management fees 59,642 61,779 119,673 122,601
Utilities 103,960 59,323 189,502 135,640
Repairs and maintenance 276,331 154,198 433,964 364,953
Insurance 27,643 41,478 66,876 84,152
Taxes 72,251 71,586 137,681 142,526
----------------------------------------------------------------------
Total Operating Expenses 688,447 513,551 1,211,412 1,112,185
----------------------------------------------------------------------
O ther Expenses
Partnership expense 33,489 18,742 52,733 45,702
Interest expense 188,951 191,112 378,427 382,746
Depreciation and amortization 241,825 228,013 461,152 452,419
----------------------------------------------------------------------
Total Expenses 1,152,712 951,418 2,103,724 1,993,052
----------------------------------------------------------------------
Net income (loss) $ (86,574) $ 140,260 $ (7,432) $ 182,077
======================================================================
Net income (loss) allocated to
General Partner $ (866) $ 1,403 $ (74) $ 1,821
======================================================================
Net income (loss) allocated to
Limited Partner Unit Holders $ (85,708) $ 119,221 $ (7,358) $ 154,765
======================================================================
Net income allocated to Special
Limited Partner $ - $ 19,636 $ - $ 25,491
======================================================================
Net income (loss) allocated
to each unit $ 2.39 $ 3.33 $ (0.21) $ 4.32
=====================================================================
Weighted average number of units
outstanding 35,801 35,801 35,801 35,801
======================================================================
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended Special Partner Total
June 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 (29) (2,911) (291,062) (294,002)
Net income 1,821 25,491 154,765 182,077
--------------------------------------------------------------
Balance, June 30, 1995 $ (8,998) $(1,382,912) $ 10,555,924 $ 9,164,014
--------------------------------------------------------------
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 (74) - (7,358) (7,432)
------------------------------------------------------------------
Balance, June 30, 1996 $ (7,031) $ (1,359,378) $10,140,303 $ 8,773,894
--------------------------------------------------------------
</TABLE>
Note:Units of Limited Partnership Interest outstanding for both June 30, 1996
and June 30, 1995 were 35,801.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 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 fees paid or accrued by the Partnership to Winthrop
Management, an affiliate of the General Partners, totaled $51,766 and $106,032
during the six months ended June 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.
<PAGE>
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 June 30, 1996, the Partnership's unrestricted cash balance had decreased
to $478,834 from $627,142 at December 31, 1995. The decrease in cash was due to
$309,262 of cash from operating activities which was more than offset by
$130,792 of cash used in investing activities and $326,778 of cash used in
financing activities during the six months ended June 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 June 30, 1996
the Partnership has $116,839 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 $595,673
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 $130,792 on capital
improvements during the first six months of 1996 compared to $163,596 in the
first six months of 1995.
Results of Operations
The Partnership incurred a net loss of $7,432 for the six months ended June 30,
1996, compared to net income of $182,077 for the six months ended June 30, 1995.
The net loss for the three months ended June 30, 1996 was $86,574 compared to
net income of $140,260 for the same period in 1995. The decreases were
attributable to decreased revenues and increased operating expenses.
The Partnership's total revenue decreased by 3.6% for the six months of 1996
compared to the six months of 1995. Rental income decreased by 2.6% to
$1,907,013 in 1996 from $1,958,913 in 1995. Average rents at the Partnership's
four properties have increased 5.6% during the six months, however the combined
average occupancy for all four properties was 86% compared to 93% in the six
months of 1995. Other income for the six months ended June 30, 1996 was $175,300
compared to $205,162 for the same period in 1995. The decrease was primarily the
result of decreased corporate unit revenues at St. Michaels.
The Partnership's total revenue decreased by 2.3% for the three months ended
June 30, 1996 compared to the three months ended June 30, 1995. Decreased rental
revenues as a result of lower occupancy were partially offset by increases in
interest and other income.
Expenses of operating the properties increased by $99,227 during the six month
period ended June 30, 1996 compared to the prior six month period ended June 30,
1995 from $1,112,185 to $1,211,412 primarily due to an increases in utilities
and various repairs and maintenance expense categories.
The operating expenses increased $174,896 during the three month period ended
June 30, 1996 compared to the three month period ended June 30, 1995. The
expense increases were primarily in utilities and repairs and maintenance.
<PAGE>
Other expenses increased by $11,445 or 1.4% for the six months ended June 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 six months ended June 30, 1996, due to inflation
and changing economic conditions which could affect occupancy levels, rental
rates and operating expenses.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Except as disclosed below, the Partnership is not a party, nor are any of its
properties subject, to any material pending legal proceedings.
RTC Commercial Loan Trust 1995 - NP1A, Plaintiff v. Winthrop Management, et al.
United States District Court for the Eastern District of Virginia; Case No.
3:96CV177.
On April 15, 1996, the United States District Court for the Eastern District of
Virginia granted defendant's motion to dismiss without prejudice the plaintiff
and vacate the court's March 20th order to appoint a receiver due to a lack of
diversity jurisdiction.
RTC Commercial Loan Trust 1995-NP1A v. Winthrop Management, et al., Circuit
Court City of Richmond, Virginia, Case No. 760CL96B01323-00.
This proceeding was filed on May 30, 1996 against the general partner of the
Partnership and a number of its affiliates, essentially asserting the same
claims as were raised in the Federal Court proceeding (described above) which
was dismissed in April 1996. Plaintiff seeks compensatory damages of
approximately $2.3 million in connection with an alleged default in payment on a
promissory note held by Plaintiff, and punitive damages of $3 million associated
with its claims of tortious interference with its contractual arrangements with
one of the defendants.
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 June 30. 1996.
<PAGE>
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
By: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
By: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
Date: August 13, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
six month period ending June 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 478,834
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,257,111
<PP&E> 24,032,759
<DEPRECIATION> (7,981,429)
<TOTAL-ASSETS> 17,411,851
<CURRENT-LIABILITIES> 370,226
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,773,894
<TOTAL-LIABILITY-AND-EQUITY> 17,411,851
<SALES> 0
<TOTAL-REVENUES> 2,096,292
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,725,297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,427
<INCOME-PRETAX> (7,432)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,432)
<EPS-PRIMARY> (00.21)
<EPS-DILUTED> (00.21)
</TABLE>
