SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996 Commission File Number 0-17461
Southeastern Income Properties II Limited Partnership
(Exact name of small business issuer as specified in its charter)
Massachusetts 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
- - ---------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
1996 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 3,541,569 3,493,076
----------- -----------
23,950,460 23,901,967
Less accumulated depreciation 7,754,414 7,545,031
----------- -----------
16,196,046 16,356,936
----------- -----------
Cash 570,687 627,142
Tenant security deposits 245,708 237,327
Loan cost, net accumulated amortization of
$170,515 and $160,515 118,220 128,164
Other assets 442,523 364,787
------------ ------------
1,377,138 1,357,420
----------- -----------
Total assets $17,573,184 $17,714,356
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities applicable to investment in rental property
Mortgages payable $ 8,293,424 $ 8,318,589
Other liabilities
Accounts payable 3,020 91,185
Accrued interest payable 63,955 63,955
Rents received in advance 17,565 26,919
Tenant security deposits 116,082 117,671
Other liabilities 101,143 38,791
------------- -------------
Total liabilities 8,595,189 8,657,110
------------ ------------
Partners' Capital
Limited partner unit holders 50,000 units authorized,
35,801 outstanding March 31, 1996 and December 31, 1995 10,331,284 10,420,822
Special Limited Partner (1,347,134) (1,356,646)
General Partner (6,155) (6,930)
------------ ------------
Total partners' capital 8,977,995 9,057,246
------------ ------------
Total liabilities and partners' capital $ 17,573,184 $ 17,714,356
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
STATEMENTS OF OPERATIONS
- - ---------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1996 and 1995
(Unaudited) 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income
Rental $ 955,705 $ 963,410
Interest income 7,227 5,095
Other income 67,222 114,946
----------- -----------
1,030,154 1,083,451
----------- -----------
Expenses
Leasing 59,175 80,235
General and administrative 55,921 56,891
Management fees 60,031 60,822
Utilities 85,542 76,317
Repairs and maintenance 157,633 210,755
Insurance 39,233 42,674
Taxes 65,430 70,940
----------- -----------
Total Operating Expenses 522,965 598,634
----------- -----------
Other Expenses
Partnership expense 19,244 26,960
Interest expense 189,476 191,634
Depreciation and amortization 219,327 224,406
----------- ------------
Total Expenses 951,012 1,041,634
----------- ------------
Net income $ 79,142 $ 41,817
=========== ===========
Net income allocated to General Partner $ 791 $ 418
============ ============
Net income allocated to Limited Partner
Unit Holders $ 78,350 $ 41,399
=========== ===========
Net income allocated to Special Limited Partner $ - $ -
========= ============
Net income allocated to each unit $ 2.19 $ 1.16
============== ============
Weighted average number of units outstanding 35,801 35,801
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
STATEMENTS OF CASH FLOWS
- - ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
1996 1995
(Unaudited) (Unaudited)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 79,142 $ 41,817
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 219,327 224,406
Increase in tenant security deposits (net) (9,970) (14,537)
Increase in other assets (77,736) (43,893)
Decrease accounts payable (88,165) (82,932)
Decrease in prepaid rent (9,354) 11,943
Increase in other liabilities 62,352 58,867
----------- ----------
Net cash provided by operating activities 175,596 195,671
----------- -----------
Cash flows from investing activities
Investment in rental property (48,493) (55,423)
----------- ------------
Net cash used in investing activities (48,493) (55,423)
----------- ------------
Cash flows from financing activities
Principal payments on mortgage note (26,165) (23,009)
Cash distributions paid to partners ( 158,392) (135,610)
------------- ----------
Net cash used in financing activities (183,557) (158,619)
----------- -----------
Net decrease in cash (56,455) (18,371)
Cash, beginning 627,142 475,375
----------- -----------
Cash, ending $ 570,687 $ 457,004
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 189,477 $ 191,634
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
- - ---------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended Special Partner Total
March 31, 1996 and 1995 General Limited Unit Partners'
(Unaudited) Partner Partner Holders Capital
- - ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ (10,790) $(1,405,492) $ 10,692,221 $ 9,275,939
Distributions paid (13) (1,343) (134,254) (135,610)
Net loss 418 5, 855 35,544 41,817
--------- -------- ----------- -----------
Balance, March 31, 1995 $ (10,385) $(1,400,980) $ 10,593,511 $ 9,182,146
=========== =========== ============ ============
Balance, December 31, 1995 $ (6,930) $(1,356,646) $ 10,420,822 $ 9,057,246
Distributions paid (16) (1,568) (156,808) (158,392)
Net income 791 11,080 67,270 79,142
---------- ----------- ------------ ------------
Balance, March 31, 1996 $ (6,155) $(1,347,134) $ 10,331,284 $ 8,977,995
========= =========== ============ ============
Note: Units of Limited Partnership Interest for both March 31, 1995 and March 31, 1996 were 35,801.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 $60,031 and $60,822
during the three months ended March 31, 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 OR PLAN OF OPERATION
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.
During the quarter ended March 31, 1996, rental revenue and other income from
the properties, along with interest income from the Partnership's short-term
investments, was insufficient to cover: (i) all operating expenses and debt
service of the properties; (ii) all administrative expenses of the Partnership;
and (iii) cash, distributions to partners totaling $158,392. The Partnership
utilized its remaining cash to fund $48,493 of capital improvements to the
Partnership's properties. As of March 31, 1996, the Partnership's unrestricted
cash balance had decreased to $590,687 from $627,142 at the December 31, 1995.
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 March 31, 1996
the Partnership has $101,656 in reserves held by the mortgage lender, the use of
which is restricted for capital improvements to Hunters Creek Apartments.
Therefore, as of March 31, 1996, the Partnership has total reserves of $692,343,
which are 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 $48,493 on capital
improvements during the first three months of 1996 compared to $55,423 in the
first three months of 1995.
Results of Operations
The Partnership generated net income of $79,142 for the three months ended March
31, 1996, compared to net income of $41,817 for the three months ended March 31,
1995.
The Partnership's total revenue decreased by 4.9% for the first quarter of 1996
compared to the first quarter of 1995. Rental income decreased by .8% to
$955,705 in 1996 from $963,410 in 1995. Average rents at the Partnership's four
properties have increased 5.7% during the first quarter, however the combined
average occupancy for all four properties was 87% compared to 92% in the first
quarter of 1995.
Other income for the quarter ended March 31, 1996 was $67,222 compared to
$114,546 for the same quarter in 1995. The decrease was primarily the result of
decrease corporate unit revenues at St. Michaels.
Expenses of operating the properties decreased by $75,669 during the three month
period ended March 31, 1996, compared to the prior three month period ended
March 31, 1995, from $598,634 to $522,965 primarily due to a decrease in
corporate unit expense (included in leasing expenses) and various repairs and
maintenance expense categories.
Other expenses decreased by $14,953 or 3.3%. Depreciation and amortization
expenses declined as a result of having fully depreciated assets during 1995.
Partnership expenses declined due to lower audit and tax fees.
The results of operations in future quarters may differ from the results of
operations for the quarter and three months ended March 31, 1996, due to
inflation and changing economic conditions which could affect occupancy levels,
rental rates and operating expenses.
<PAGE>
PART II
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, a Delaware business trust, Plaintiff v.
Winthrop Management, a Massachusetts general partnership, Defendant, 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 predjudice the plaintiff
and vacate the court's March 20th order to appoint a receiver due to a lack of
diversity jurisdiction.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
No Report on Form 8-K was required to be filed during the period.
<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
Dated: May 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
three month period ending March 31, 1996 and is
qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000822983
<NAME> Southeastern Income Properties II
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 570,687
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 806,451
<PP&E> 23,950,460
<DEPRECIATION> 209,383
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 8,595,189
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,977,995
<TOTAL-LIABILITY-AND-EQUITY> 17,573,184
<SALES> 0
<TOTAL-REVENUES> 1,030,154
<CGS> 0
<TOTAL-COSTS> 522,965
<OTHER-EXPENSES> 219,327
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,476
<INCOME-PRETAX> 79,142
<INCOME-TAX> 0
<INCOME-CONTINUING> 79,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,142
<EPS-PRIMARY> 00.00
<EPS-DILUTED> 00.00
</TABLE>
