<PAGE>
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, 1997 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
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December31,
1997 1996
------------------ ------------------
(Unaudited) (Audited)
------------------ ------------------
<S> <C> <C>
ASSETS
Investment in rental property
Land $ 2,664,225 $ 2,664,225
Buildings and building improvements 18,060,739 17,990,842
Personal property 3,527,668 3,527,668
------------------ ------------------
24,252,632 24,182,735
Less accumulated depreciation 8,646,306 8,426,051
15,606,326 15,756,684
Cash and cash equivalents 777,981 647,080
Tenant security deposits 103,049 162,055
Loan cost, net accumulated amortization of $210,289
and $200,346 78,775 88,389
Other assets 465,590 416,730
------------------ ------------------
Total Assets $ 17,031,721 $ 17,070,938
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities applicable to investment in rental property
Mortgages payable $ 8,187,732 $ 8,215,187
Other liabilities
Accounts payable 143,444 32,825
Accrued interest payable 63,955 63,955
Rents received in advance 1,041 17,923
Tenant security deposits 101,800 100,510
Other liabilities 24,221 64,684
------------------ ------------------
Total Liabilities 8,522,193 8,495,084
------------------ ------------------
Partners' Capital
Limited partners unit holders 50,000 units authorized,
35,801 outstanding March 31, 1997 December 31, 1996 9,916,633 9,973,010
Special Limited Partner (1,397,429) (1,388,143)
General Partner's Capital (9,676) (9,013)
Total Partners' Capital 8,509,528 8,575,854
------------------ ------------------
Total Liabilities and Partners' Capital $ 17,031,721 $ 17,070,938
================== ==================
</TABLE>
See notes to financial statements
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
PART 1 - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended March 31, 1997 and 1996 1997 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
Income
Rental $ 898,871 $ 955,705
Interest income 2,363 7,227
Other 63,461 67,222
------------------ ------------------
Total income 964,695 1,030,154
Expenses
Leasing 30,394 59,175
General & administrative 76,399 55,921
Management fees 56,402 60,031
Utilities 103,332 85,542
Repairs & maintenance 157,457 157,633
Insurance 33,183 39,233
Taxes 79,018 65,430
------------------ ------------------
Total operating expenses 536,185 522,965
Other expenses
Partnership expenses 77,410 19,244
Interest expense 187,227 189,476
Depreciation and amortization 230,199 219,327
------------------ ------------------
Total expenses 1,031,021 951,012
Net (loss) income $ (66,326) $ 79,142
================== ==================
Net (loss) income allocated to general partner $ (663) $ 791
================== ==================
Net (loss) income allocated to limited partner unit holders $ (56,377) $ 78,350
================== ==================
Net (loss) income allocated to special limited partner $ (9,286) $
================== ==================
Net (loss) income allocated to each unit $ (1.57) $ 2.19
================== ==================
Weighted average number of units outstanding 35,801 35,801
================== ==================
</TABLE>
See notes to financial statements
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS CAPITAL
<TABLE>
<CAPTION>
For the three months ended 1% 14% 85% Total
March 31, 1997 and 1996 General partner Special Partner partners'
(unaudited) limited unit capital
partner holders
------------------ ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balance December 31, 1995 $ (6,930) $ (1,356,646) $ 10,420,822 $ 9,057,246
------------------ ---------------- ------------------ ------------------
Distribution paid (16) (1,568) (156,808) (158,392)
Net income 791 11,080 67,270 79,141
Balance, March 31, 1996 $ (6,155) $ (1,347,134) $ 10,331,284 $ 8,977,995
================== ================ ================== ==================
Balance December 31, 1996 $ (9,013) $ (1,388,143) $ 9,973,010 $ 8,575,854
Net loss (663) (9,286) (56,377) (66,326)
Balance, March 31, 1997 $ (9,676) $ (1,397,429) $ 9,916,633 $ 8,509,528
================== ================ ================== ==================
</TABLE>
Note: Units of Limited Partnership Interest for both March 31, 1996 and
March 31, 1997 were 35,801.
See notes to financial statements.
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended 1997 1996
March 31, 1997 and 1996 (Unaudited) (Unaudited)
----------------- ------------------
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income $ (66,326) $ 79,142
----------------- ------------------
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 230,199 219,327
Decrease (increase) in tenant security deposits (net) 60,296 (9,970)
Increase in other assets (48,860) (77,736)
Increase (decrease) in accounts payable 110,619 (88,165)
Decrease in prepaid rent (16,882) (9,354)
(Decrease) increase in other liabilities (40,463) 62,352
Net cash provided by operating activities 228,583 175,596
Cash flows from investing activities:
Investment in rental property (69,897) (48,493)
Net cash used in investing activities (69,897) (48,493)
Cash flows from financing activities:
Principal payments on mortgage note (27,455) (25,165)
Cash distributions paid to partners (158,392)
Increase in deferred fees (330)
Net cash used in financing activities (27,785) (183,557)
Net increase (decrease) in cash and cash equivalents 130,901 (56,454)
Cash and cash equivalents, beginning 647,080 627,142
Cash and cash equivalents, ending $ 777,981 $ 570,688
================== ==================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 187,227 $ 189,477
================== ==================
</TABLE>
See notes to financial statements.
-5-
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
1. ACCOUNTING AND FINANCIAL REPORTING POLICIES
The condensed consolidated financial statements included herein have been
prepared by Southeastern Income Properties II Limited Partnership (the
"Partnership"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Partnership's accounting and financial
reporting policies are in conformity with generally accepted accounting
principles and include adjustments in interim periods considered necessary for a
fair presentation of the results of operations. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Partnership's latest
annual report on Form 10KSB.
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, 1997.
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 and asset management fees paid or accrued by the Partnership to
Winthrop Management, an affiliate of the General Partner, totaled $8,285, which
represents Asset Management Fees, and $51,766, which represents Asset Management
Fees and Property Management Fees during the three months ended March 31, 1997
and 1996, 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.
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
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 pursuant to
leases of up to one year.
During the quarter ended March 31, 1997, rental revenue and other income from
the properties, along with interest income from the Partnership's shortterm
investments, was sufficient to cover: (i) all operating expenses and debt
service of the properties and (ii) all administrative expenses of the
Partnership. The Partnership utilized its remaining cash to fund $69,897 of
capital improvements to the Partnership's properties. As of March 31, 1997, the
Partnership's unrestricted cash balance had increased to $777,981 from $647,080
at December 31, 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.
The Partnership is in the process of reviewing the status of all the properties
with a view towards disposing of all its properties, depending on property
operations and market conditions. The mortgage loan on St. Michaels matures June
1, 1997 and the property is being marketed for sale. Due to market deterioration
primarily arising from the reduction in military personnel in the area, the
Partnership has, to date, been unable to locate a buyer for the property, or to
find sufficient replacement refinancing. In addition, the lender has refused the
Partnership's attempts to extend or restructure the existing loan. As a result
it is expected that the property will be lost through foreclosure. As a result
of the continuance of the capital improvement program at all of the
Partnership's properties, 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, 1997
the partnership has $108,943 in reserves held by one of the mortgage lenders,
the use of which is restricted for capital improvements to Hunters Creek
Apartments. Therefore, as of March 31, 1997, the Partnership has total reserves
of $886,924, 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 $69,897 on capital improvements during the first three months of 1997
compared to $48,493 in the first three months of 1996.
Results of Operations
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
The Partnership generated a net loss of $66,326 for the three months ended March
31, 1997, compared to net income of $79,142 for the three months ended March 31,
1996.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(Continued)
Results of Operations (Continued)
The Partnership's total revenue decreased by 6.4% for the first quarter of 1997
compared to the first quarter of 1996. Rental income decreased by 6% to $898,871
in 1997 from $955,705 in 1996. Average rents at the Partnership's four
properties have increased 2.6% during the first quarter, however the combined
average occupancy for all four properties was 81% compared to 87% in the first
quarter of 1996. This drop in vacancy is primarily attributable to St. Michaels
and Hunters Creek whose average occupancies in the first quarter of 1997 were
63% and 81% respectively, as compared to 74% and 89% for the first quarter ended
March 31, 1996. Occupancy at Copper Croft and Greenbryre for the three months
ended March 31, 1997 was 96% and 95%, respectively.
Other income for the quarter ended March 31, 1997 was $63,461 compared to
$67,222 for the same quarter in 1996. The decrease was primarily the result of
decreased corporate unit revenues at St. Michaels.
Expenses of operating the properties increased by $13,220 during the three month
period ended March 31, 1997 compared to the three month period ended March 31,
1996 from $522,965 to $536,185 primarily due to an increase in general and
administrative expense and utility expense. These increases were partially
offset by a decrease in leasing expense due to a decrease in furnished units.
Other expenses increased by $66,789 or 15.6% of which Partnership expenses
increased by $58,166 from $19,244 for the period ending March 31, 1996 to
$77,410 for the period ending March 31, 1997.
The results of operations in future quarters may differ from the results of
operations for the quarter ended March 31, 1997, due to inflation and changing
economic conditions which could affect occupancy levels, rental rates and
operating expenses.
-8-
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
PART II
ITEM 1 - LEGAL PROCEEDINGS
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on form 8-K
(a) Exhibit 27
Financial Data Schedule
(b) Reports on Form 8-K:
No report on Form 8-K were filed during the three months ended
March 31, 1997.
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<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHEASTERN INCOME PROPERTIES II
LIMITED PARTNERSHIP
By:Winthrop Southeastern Limited Partnership
Its General Partner
By:Eight Winthrop Properties, Inc.,
Its General Partner
Date: May 13, 1997 By:/s/ Edward V. Williams
----------------------------------------------
Edward V. Williams
Chief Financial Officer
Date: May 13, 1997 By:/s/ Richard J. McCready
----------------------------------------------
Richard J. McCready
Chief Executive Officer
<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, 1997 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 777,981
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 24,252,632
<DEPRECIATION> (8,646,306)
<TOTAL-ASSETS> 17,031,721
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,509,528
<TOTAL-LIABILITY-AND-EQUITY> 17,031,721
<SALES> 0
<TOTAL-REVENUES> 962,332
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 459,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 187,227
<INCOME-PRETAX> (66,326)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,326)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,326)
<EPS-PRIMARY> (1.57)
<EPS-DILUTED> (1.57)
</TABLE>
