<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of Securities Exchange Act of 1934
Commission File
For the fiscal year ended December 31, 1998 Number 0-17461
----------------- -------
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Virginia 54-1288787
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Cambridge Center, Cambridge, Massachusetts 02142
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 234-3000
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Registrant's revenues for its most recent fiscal year were $4,972,887.
No market exists for the limited partnership interests of the Registrant, and,
therefore, no aggregate market value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Business.
Southeastern Income Properties II Limited Partnership (the
"Registrant") was organized under the Virginia Uniform Limited Partnership Act
on September 20, 1984 for the purpose of acquiring, owning, operating, and
ultimately selling existing residential apartment complexes located primarily
in the southeastern United States. The general partner of the Registrant is
Winthrop Southeast Limited Partnership, a Delaware limited partnership ("WSLP"
or the "Managing General Partner"), whose general partner is Eight Winthrop
Properties, Inc., a Delaware corporation ("Eight Winthrop").
In 1988, the Registrant sold, pursuant to a Registration Statement
filed with the Securities and Exchange Commission, 50,000 assignee units of
limited partnership interest ("Units") in the Registrant at a purchase price
of $500 per Unit (an aggregate of $25,000,000).
The Registrant's only business is acquiring, owning, operating and
ultimately selling residential apartment complexes. See Item 2, "Description
of Properties." The Registrant invested $16,042,088 of the original offering
proceeds (net of sales commissions and sales and organizational costs, but
including acquisition fees and expenses) in four residential apartment
properties. All four properties were acquired by the Registrant directly.
Three properties were purchased free and clear of mortgage indebtedness, while
the fourth, St. Michaels, was purchased subject to an existing mortgage loan.
As a result of the value of St. Michaels being less than the balance on the
loan at its maturity, on August 1, 1997 the lender foreclosed on St. Michaels.
During the second half of 1998, the Registrant sold two of its Properties. See
"Sales" below. As a result, the Registrant currently owns only one property
which is currently under contract for sale. If the remaining property is sold,
the Registrant will be liquidated in 1999.
Property Matters
St. Michaels Apartments - The Mortgage loan for the St. Michaels
property matured on June 1, 1997. As a result of the principal balance on the
mortgage loan being in excess of the property's value, the Partnership was
unable to refinance such loan or sell the property at a value sufficient to
satisfy the loan. As a result, the mortgage lender foreclosed on the property
as of August 1, 1997. The Partnership recognized an extraordinary gain on such
foreclosure of $757,801.
Coppercroft Apartments - On August 13, 1998, the Registrant sold
Coppercroft Apartments located in Roanoke, Virginia to an unaffiliated third
party for a purchase price of $3,200,000. Net proceeds to the Registrant,
after satisfaction of closing costs, were $2,984,900. The sale generated a
gain of approximately $511,000 for financial reporting purposes. Net proceeds
from the sale were distributed to the Registrant's partners during the fourth
quarter of 1998.
2
<PAGE>
Greenbryre Apartments - On December 1, 1998, the Registrant sold
Greenbryre Apartments located in Charlotte, North Carolina to an unaffiliated
third party for a purchase price of $5,550,000. Net proceeds to the
Registrant, after satisfaction of closing costs, were $5246, 400. The sale
generated a gain of approximately $1,553,000 for financial reporting purposes.
Net proceeds from the sale were distributed to the Registrant's partners
during the fourth quarter of 1998.
Hunter's Creek Apartments - On October 20, 1998, the Registrant
entered into an agreement to sell its Hunter's Creek Apartments property to an
unaffiliated third party for a purchase price of $7,750,000. This sale is
conditioned upon the buyer being able to assume the existing loan encumbering
the property. It is expected that this sale, if it is consummated, will close
during the second quarter of 1999. There can be no assurance, however, that
this sale will be consummated or, if consummated, that it will be sold at the
current purchase price.
Employees
The Registrant does not have any employees. Until March 18, 1996,
management services were performed for the Registrant at its properties by
on-site personnel all of whom were employees of Winthrop Management, an
affiliate of the Managing General Partner, which directly managed the
Registrant's properties. All payroll and associated expenses of such on-site
personnel were fully reimbursed by the Registrant to Winthrop Management.
Pursuant to a management agreement, Winthrop Management provided certain
property management services to the Registrant in addition to providing
on-site management. Winthrop Management is a Massachusetts general partnership
whose Managing General partner is First Winthrop Corporation, the parent of
Eight Winthrop.
On March 18, 1996, Registrant appointed an unaffiliated management
company to assume management of its properties. (See "Item 3, Legal
Proceedings.") The provisions of the new management agreement are
substantially similar to those of the Winthrop Management Agreement. The term
of the existing Management Agreement is for one year, renewable annually.
Competition
The real estate business is highly competitive and the Registrant's
remaining property has active competition from similar properties in the
vicinity. Furthermore, various limited partnerships controlled by the Managing
General Partner and/or its affiliates are also engaged in business which may
be competitive with the Registrant. The Registrant is also competing for
potential buyers with respect to the ultimate sale of its remaining property.
See "Item 6, Management's Discussion and Analysis of Financial Condition and
Results of Operation."
3
<PAGE>
Item 2. Description of Property.
The Registrant's remaining property, Hunter's Creek Apartments (the
"Property"), is located in Charlottesville, Virginia and contains 240
apartment units. The Property, which is owned in fee simple by the Registrant,
was originally acquired by the Registrant on September 29, 1984 for a purchase
price of $7,585,054. The Property is subject to a first mortgage loan which
had a principal balance of $3,916,472 at December 31, 1998, bears interest at
9.52% per annum and matures on March 31, 2000, at which time the outstanding
principal balance due on the loan will be $3,833,000.
The following table sets forth the average annual occupancy rate and
per unit average monthly rental rate at the Property for the years ended
December 31, 1997 and 1998.
1998 1997
---- ----
Occupancy 85% 84%
Average Monthly Rent/Unit $550 $539
Set forth below is a table showing the carrying value and accumulated
depreciation and federal tax basis of the Property as of December 31, 1998.
Federal
Carrying Accumulated Tax
Value Depreciation Rate Method Basis
---------- ------------ -------- -------- -----------
$9,093,000 $3,612,000 5-30 yrs S/L $3,757,726
The realty tax rate and realty taxes paid for the Property in 1998
were $.63 and $57,000, respectively.
As noted under "Item 1, Description of Business", the real estate
industry is highly competitive. The Property is subject to competition from
other apartment complexes in the area. The Registrant maintains property and
liability insurance on the Property which the Registrant believes to be
adequate. The apartment leases for the Property are for a term of one year or
less, and no tenant leases 10% or more of the available rental space. Except
for necessary capital expenditures, the Registrant has no present intentions
of investing any additional capital in the Property.
Item 3. Legal Proceedings.
The Registrant is not a party, nor are any of its properties subject,
to any material pending legal proceedings.
4
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the
period covered by this report.
5
<PAGE>
PART II
Item 5. Market Price for the Registrant's Common Equity and Related
Stockholder Matters.
The Registrant is a partnership and thus has no common stock. There
is currently no established public market in which the Units are traded, nor
is it anticipated that a public market will develop. Trading in the Units is
sporadic and occurs solely through private transactions.
As of March 1, 1999, there were 1,714 holders of 35,801 Units.
Distributions of $9,471,513 ($264.56 per Unit) were made to holders
of the Units for the year ended December 31, 1998 from proceeds of the sales
of Coppercroft Apartments and Greenbryre Apartments, and cash flow from
operations. No distributions were made to holders of Units during the year
ended December 31, 1997. See "Item 6, Management's Discussion and Analysis or
Plan of Operation," for information relating to the Registrant's future
distributions.
6
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
---------------------------------------------------------
The matters discussed in this Form 10-KSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosure contained in this Form
10-KSB and the other filings with the Securities and Exchange
Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations,
including forward-looking statements pertaining to such matters,
does not take into account the effects of any changes to the
Registrant's business and results of operations. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors,
including those identified herein.
Liquidity and Capital Resources
-------------------------------
The Registrant receives rental income from its properties and is
responsible for operating expenses, administrative expenses,
capital improvements and debt service payments. During 1998, the
Registrant sold two of its three properties. The remaining
property, Hunters Creek, located in Virginia, is leased to tenants
who are subject to leases of up to one year. Upon sale of the
Registrant's remaining property, the Partnership will be
liquidated.
During the year ended December 31, 1998, rental revenue and other
income from the properties, along with interest income from the
Registrant's short-term investments, was sufficient to cover all
operating expenses and debt service of the properties and all
administrative expenses of the Registrant; as well as all capital
improvements made to the properties during 1998. The Registrant
had $566,770 of cash and cash equivalents at December 31, 1998, as
compared to 1,160,850 as of December 31, 1997. The decrease of
$594,080 in cash and cash equivalents was due to $9,526,796 of
cash used in financing activities which was partially offset by
$7,920,856 of cash provided by investing activities and $1,011,860
of cash provided by operating activities. Cash used in financing
activities primarily consisted of $9,484,043 of distributions to
partners and $39,503 of mortgage principal payments. Distributions
made during the year ended December 31, 1998 consisted of proceeds
from the sale of the Partnership's Copper Croft and Greenbyre
properties and excess cash flow from operations. Net cash provided
by investing activities consisted of $8,231,300 of net proceeds
from the sale of Registrant's Copper Croft and Greenbyre
properties, which was slightly offset by $249,712 of improvements
to real estate and a $60,732 increase in replacement reserves. All
other increases (decreases) in assets and liabilities are the
result of the timing of certain receipts and payments.
It is expected that future rental revenue and other income from
the Registrant's remaining property will continue to be sufficient
to cover all administrative expenses of the Registrant and all
operating expenses and debt service of the property, as well as
necessary capital expenditures. At December 31, 1998, the
Registrant has $566,770 of unrestricted cash reserves. The
Registrant has invested, and expects to continue to invest, such
amounts in money market instruments until required for partnership
purposes. As of December 31, 1998, the Registrant had $419,995 in
reserves held by the mortgage lender, the use of which is
restricted for capital improvements to the Hunters Creek
Apartments. Therefore, as of December 31, 1998, the Registrant has
total reserves of $986,765, which is expected to be sufficient to
satisfy working capital requirements of the Registrant. The
Registrant, as required by the Registrant's Partnership Agreement,
must retain as working capital reserves an amount equal to at
least 1% of capital contributions of the Unit Holders.
On August 13, 1998, the Partnership sold its Copper Croft
Apartments property to an unaffiliated third party for a purchase
price of $3,200,000. After closing costs and adjustments, the
Registrant received net proceeds of $2,984,900. For financial
reporting purposes, the sale resulted in a gain of approximately
$511,000.
On December 1, 1998, the Partnership sold The Greenbyre Apartments
property to an unaffiliated third party for a purchase price of
$5,550,000. After closing costs and adjustments, the Registrant
received net proceeds of $5,246,400. For financial reporting
purposes, the sale resulted in a gain of approximately $1,553,000.
The Partnership has entered into an agreement with an unaffiliated
third party to sell the Hunters Creek Apartments property, the
only remaining property of the Registrant, for a sales price of
$7,750,000. The sale is conditioned upon the buyer being able to
assume the existing loan encumbering the property, which matures
in March 2000 with a balloon payment of $3,833,000. It is expected
that this sale, if consummated, will close during the second
quarter of 1999. There can be no assurance, however, that this
sale will be consummated or, if consummated, that it will be sold
at the current selling price. For financial statement purposes the
sale will result in a gain in 1999.
<PAGE>
Results of Operations
---------------------
The Registrant's income before extraordinary gain for the year
ended December 31, 1998 was $2,414,416 as compared to $196,242 for
the year ended December 31, 1997. The increase in income before
extraordinary gain was due primarily to $2,064,244 in gain on sale
of properties.
Rental income decreased for the year ended December 31, 1998 as
compared to 1997, as a result of the sale of the Registrant's
Copper Croft and Greenbyre properties in 1998. Rental revenue for
the remaining property increased by $16,233 for 1998, as compared
to 1997, due to increased average occupancy and rental rate. Other
income decreased by $138,385 as a result of the property sales.
Operating expenses declined for the year ended December 31, 1998,
as compared to 1997, primarily due to property sales. Operating
expenses at the Registrant's remaining property declined primarily
due to lower repair and maintenance expense. All other expenses at
the remaining property remained relatively constant.
Year 2000
---------
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. The Registrant is dependent upon the Managing General
Partner and its affiliates for management and administrative
services. Any computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date
using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in
similar normal business activities.
During the first half of 1998, the Managing General Partner and
its affiliates completed their assessment of the various computer
software and hardware used in connection with the management of
the Registrant. This review indicated that significantly all of
the computer programs used by the Managing General Partner and its
affiliates are off-the-shelf "packaged" computer programs which
are easily upgraded to be Year 2000 compliant. In addition, to the
extent that custom programs are utilized by the Managing General
Partner and its affiliates, such custom programs are Year 2000
compliant.
Following the completion of its assessment of the computer
software and hardware, the Managing General Partner and its
affiliates began upgrading those systems which required upgrading.
To date, significantly all of these systems have been upgraded.
The Registrant has to date not borne, nor is it expected that the
Registrant will bear any significant cost, in connection with the
upgrade of those systems to requiring remediation. It is expected
that all systems will be remediated, tested and implemented during
the first half of 1999.
To date, the Managing General Partner is not aware of any external
agent with a Year 2000 issue that would materially impact the
Registrant's results of operations, liquidity or capital
resources. However, the Managing General Partner has no means of
ensuring that external agents will be Year 2000 compliant. The
Managing General Partner does not believe that the inability of
external agents to complete their Year 2000 resolution process in
a timely manner will have a material impact on the financial
position or results of operations of the Registrant. However, the
effect of non-compliance by external agents is not readily
determinable.
<PAGE>
Item 7. Financial Statements
--------------------
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
Financial Statements
--------------------
Year Ended December 31, 1998
----------------------------
Table of Contents
-----------------
Page
--------
Independent Auditors' Reports F-2
Financial Statements:
Balance Sheets at December 31, 1998 and 1997 F-4
Statements of Operations for the Years Ended
December 31, 1998 and 1997 F-5
Statements of Partners' Capital for the Years Ended
December 31, 1998 and 1997 F-6
Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997 F-7
Notes to Financial Statements F-8
<PAGE>
Independent Auditors' Report
----------------------------
To the Partners of
Southeastern Income Properties II Limited Partnership
We have audited the accompanying balance sheet of Southeastern Income Properties
II Limited Partnership (the "Partnership") as of December 31, 1998, and the
related statement of operations, changes in partners? capital 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 financial statements referred to above present fairly, in
all material respects, the financial position of Southeastern Income Properties
II Limited Partnership, as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Certified Public Accountants
New York, New York
February 18, 1999
F - 2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners and Unit Holders of
Southeastern Income Properties II Limited Partnership
We have audited the accompanying balance sheets of Southeastern Income
Properties II Limited Partnership as of December 31, 1997, and the related
statements of operations, partners' capital and cash flows for the years 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 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 Southeastern Income
Properties II Limited Partnership as of December 31, 1997, and the results of
its operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Reznick, Fedder and Silverman
Bethesda, Maryland
February 20, 1998
F - 3
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1998 1997
-------------------- ---------------------
<S> <C> <C>
Assets
- ------
Real Estate, at cost:
Land $ 770,964 $ 1,930,156
Buildings and building improvements 6,810,936 14,200,144
Personal property 1,511,199 2,381,325
-------------------- ---------------------
9,093,099 18,511,625
Less: Accumulated depreciation 3,612,148 6,606,923
-------------------- ---------------------
5,480,951 11,904,702
Other Assets:
Cash and cash equivalents 566,770 1,160,850
Tenant security deposits 57,653 79,220
Replacement reserves 419,995 359,263
Deferred loan costs, net of accumulated amortization
of $182,847 (1998) and $157,032 (1997) 33,028 55,593
Other assets 118,645 76,995
-------------------- ---------------------
Total Assets $ 6,677,042 $ 13,636,623
==================== =====================
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Mortgage note payable $ 3,916,472 $ 3,955,975
Prepaid rent 20,090 11,724
Accrued interest payable 32,400 32,400
Tenant security deposits payable 50,723 80,418
Accounts payable and accrued expenses 197,087 26,209
-------------------- ---------------------
Total Liabilities 4,216,772 4,106,726
-------------------- ---------------------
Partners' Capital:
Special limited partner's deficit (1,216,579) (1,254,577)
Limited partner unit holders' equity-
50,000 units authorized, 35,801 outstanding 3,653,682 10,783,947
General partner's equity 23,167 527
-------------------- ---------------------
Total Partners' Capital 2,460,270 9,529,897
-------------------- ---------------------
Total Liabilities and Partners' Capital $ 6,677,042 $ 13,636,623
==================== =====================
</TABLE>
See notes to financial statements.
F - 4
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1998 1997
----------------------- ----------------------
<S> <C> <C>
Revenues:
Rental $ 2,650,121 $ 3,434,336
Interest income 91,948 38,871
Other income 166,574 304,959
Gain on sale of properties 2,064,244 -
----------------------- ----------------------
Total revenues 4,972,887 3,778,166
----------------------- ----------------------
Expenses:
Leasing 116,441 167,415
General and administrative 221,794 316,623
Management fees 158,575 214,217
Utilities 214,853 311,124
Repairs and maintenance 547,019 670,016
Insurance 99,842 137,573
Taxes 142,769 257,927
----------------------- ----------------------
Total operating expenses 1,501,293 2,074,895
Other Expenses:
Partnership expenses 108,925 152,762
Interest expense 381,270 532,005
Depreciation and amortization 566,983 822,262
----------------------- ----------------------
Total expenses 2,558,471 3,581,924
----------------------- ----------------------
Income before extraordinary item 2,414,416 196,242
Extraordinary gain on extinguishment of debt - 757,801
----------------------- ----------------------
Net income $ 2,414,416 $ 954,043
======================= ======================
Net income allocated:
Special Limited Partner $ 49,024 $ 133,566
Limited Partners 2,341,248 810,937
General Partner 24,144 9,540
----------------------- ----------------------
$ 2,414,416 $ 954,043
======================= ======================
Net income per limited partner unit:
Income before extraordinary item $ 65.40 $ 4.66
Extraordinary gain - 17.99
----------------------- ----------------------
Net income $ 65.40 $ 22.65
======================= ======================
Distributions per unit:
Limited Partners $ 264.56 $ -
======================= ======================
</TABLE>
See notes to financial statements.
F - 5
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
<TABLE>
<CAPTION>
Units of Special
Limited Limited Limited
Partnership Partner's Partners'
Interest Capital Capital
------------------- -------------------- --------------------
<S> <C> <C> <C>
Balance - December 31, 1996 $ 35,801 $ (1,388,143) $ 9,973,010
Net income - 133,566 810,937
------------------- -------------------- --------------------
Balance - December 31, 1997 $ 35,801 (1,254,577) 10,783,947
Distributions - (11,026) (9,471,513)
Net income - 49,024 2,341,248
------------------- -------------------- --------------------
Balance - December 31, 1998 $ 35,801 $ (1,216,579) $ 3,653,682
=================== ==================== ====================
<CAPTION>
General
Partner's
(Deficit) Total
Capital Capital
-------------------- --------------------
<S> <C> <C>
Balance - December 31, 1996 $ (9,013) $ 8,575,854
Net income 9,540 954,043
-------------------- --------------------
Balance - December 31, 1997 527 9,529,897
Distributions (1,504) (9,484,043)
Net income 24,144 2,414,416
-------------------- --------------------
Balance - December 31, 1998 $ 23,167 $ 2,460,270
==================== ====================
</TABLE>
See notes to financial statements.
F - 6
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1998 1997
---------------------- ----------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,414,416 $ 954,043
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 541,168 789,466
Amortization 25,815 32,796
Gain on sale of properties (2,064,244) -
Extraordinary gain on foreclosure - (757,801)
Changes in assets and liabilities:
Tenant security deposits 21,567 82,835
Other assets (76,411) (90,517)
Prepaid rent 8,366 (6,199)
Tenant security deposits payable (29,695) (20,092)
Accounts payable and accrued expenses 170,878 (71,300)
---------------------- ----------------------
Net cash provided by operating activities 1,011,860 913,231
---------------------- ----------------------
Cash Flows From Investing Activities:
Net proceeds from sale of property 8,231,300 -
Additions to building and improvements (249,712) (372,401)
Changes in replacement reserves (60,732) 40,415
---------------------- ----------------------
Net cash provided by (used in) investing activities 7,920,856 (331,986)
---------------------- ----------------------
Cash Flows From Financing Activities:
Principal payments on mortgage note (39,503) (67,475)
Payment of deferred loan costs (3,250) -
Cash distributions paid to partners (9,484,043) -
---------------------- ----------------------
Cash used in financing activities (9,526,796) (67,475)
---------------------- ----------------------
Net (decrease) increase in cash and cash equivalents (594,080) 513,770
Cash and cash equivalents, beginning of year 1,160,850 647,080
---------------------- ----------------------
Cash and cash equivalents, end of year $ 566,770 $ 1,160,850
====================== ======================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 381,270 $ 532,045
====================== ======================
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
</TABLE>
Extraordinary gain on extinguishment of debt and loan foreclosure in 1997 - see
Note 6
See notes to financial statements.
F - 7
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------ -----------------------------------------------------------
Southeastern Income Properties II Limited Partnership (the
"Partnership") was originally formed in September 1984 for the
purpose of acquiring, operating and ultimately selling existing
apartment communities.
The Partnership Agreement (the "Agreement") has been amended
several times. Among the amendments were changes in the
allocation of net loss between general and limited partners
during the periods. The Agreement provided for K-A Southeastern
Income Properties II Limited Partnership ("K-A SIP II"), a
Virginia limited partnership, to be the general partner and for
a public offering of up to 50,000 assignee units of limited
partnership interest ("Units") at $500 per unit. Purchasers of
Units ("Unit Holders") are assignees of the limited partner and
are entitled to all the rights and economic benefits of a
limited partner. During 1988, the Partnership sold 35,801 units.
The Partnership used a portion of the offering to repay debt
related to Hunters Creek Apartments and to pay for a portion of
the cost of acquiring Copper Croft in Roanoke, Virginia, The
Greenbyre in Charlotte, North Carolina and St. Michaels in
Newport News, Virginia. During 1998, the Partnership sold its
Copper Croft and Greenbyre properties. The Partnership's St.
Michaels property was lost through foreclosure in 1997. The
Partnership's remaining property is Hunters Creek Apartments
located in Charlottesville, Virginia.
In early 1992, the Unit Holders approved certain changes in (and
amendments to) the Agreement, which converted K-A SIP II to a
special limited partner and admitted Winthrop Southeast Limited
Partnership ("WSLP" or the "General Partner") as the sole
general partner, effective February 12, 1992. K-A SIP II
retained its current capital account and adjusted capital
contribution upon its conversion to special limited partner
status. Under the revised Agreement, taxable income and loss is
to be allocated 85% to Unit Holders, 14% to K-A SIP II and 1% to
WSLP. Federal tax regulations, however, limit allocations of net
losses due to considerations as provided in Internal Revenue
Section 704(b). The revised Agreement also provides for K-A SIP
II and WSLP to receive .99% and .01%, respectively, and the
limited partners to receive the remaining 99%, of distributable
cash from operations for the five-years from the date WSLP
became the Partnership's general partner and an .88% and .12%
split between K-A SIP II and WSLP, respectively, thereafter,
until the Unit Holders have received their preferred return.
After the Unit Holders have received a noncompounded,
noncumulative annual cost return equal to 10% of their capital
contributions, as adjusted for certain capital transactions, K-A
SIP II and WSLP will receive 14% and 1%, respectively, of
distributable cash from operations for five years from the date
WSLP became the Partnership's general partner and 12.32% and
2.68%, respectively, thereafter. Cash distributions resulting
from the sale of the Partnership's properties are first
allocated 99% to Unit Holders until they receive a return of
their adjusted capital contributions, as defined. Gains arising
from the sale of the Partnership's properties are allocated
based upon cash distributions from sales. Winthrop Management
("Winthrop"), an affiliate of WSLP, served as the management
agent for the properties from August 1, 1991 through March 17,
1996, and Insignia Management Group, LP (which was subsequently
acquired by Apartment Investment and Management Company
("AIMCO") effective October 1, 1998) served as the management
agent for the properties effective March 18, 1996 through
October 31, 1998 (see Note 3). Subsequent to October 31, 1998,
an unaffiliated third party manages the property.
F - 8
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------ -----------------------------------------------------------
(Continued)
-----------
Upon liquidation of the Partnership, after payment of, or
adequate provision for, the debts and obligations of the
Partnership, the remaining assets of the Partnership would be
distributed to all partners and Unit Holders with positive
capital accounts in the proportion that the positive balance in
each partner's or Unit Holder's capital account bore to the
aggregate of such positive balances, after taking into account
all capital account adjustments for the Partnership's taxable
year during which such liquidation occurred.
Real Estate
-----------
Real estate is carried at cost, adjusted for depreciation and
impairment of value. Depreciation is determined by the
straight-line method over estimated useful lives of
approximately 27 to 30 years for buildings and improvements and
5 to 7 years for personal property. In accordance with 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," the Partnership records impairment
losses for long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows are
not sufficient to recover the asset's carrying amount. The
impairment loss is measured by comparing the fair value of the
asset to its carrying amount.
Deferred Loan Costs
-------------------
Loan costs incurred in connection with obtaining financing on
the Hunters Creek property are being amortized on a
straight-line basis over the term of the loan.
Concentration of Credit Risk
----------------------------
The Partnership maintains cash balances at institutions insured
up to $100,000 by the Federal Deposit Insurance Corporation.
Balances in excess of $100,000 are usually invested in money
market accounts, secured by United States Treasury obligations.
Cash balances exceeded these insured levels during the year.
Replacement Reserves
--------------------
Replacement Reserves are comprised of Partnership funds held by
the Partnership's mortgage lender, the use of which are limited
to specific capital or other costs, and totaled $419,995 and
$359,263 at December 31, 1998 and 1997, respectively.
Rental Income
-------------
Rental income is recognized as rents become due. Rental payments
received in advance are deferred until earned. All leases
between the Partnership and the tenants of the property are
operating leases for terms of up to one year.
F - 9
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------ -----------------------------------------------------------
(Continued)
Income Taxes
------------
Taxable income or loss of the Partnership is recorded in the
income tax returns of its partners. Accordingly, no provision
for income taxes is made in the financial statements of the
Partnership.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Disclosures About the Fair Value of Financial Instruments
---------------------------------------------------------
SFAS No. 107 "Disclosures About the Fair Value of Financial
Instruments", requires that disclosure be made of estimates of
the fair value of each class of financial instrument. Financial
instruments held by the Partnership as of December 31, 1998 and
1997, consist primarily of cash and cash equivalents, short-term
trade receivables and payables, for which the carrying amounts
approximate fair values due to the short-term maturity of these
instruments, and long-term debt. The Partnership estimates the
fair value of its fixed rate mortgage by discounted cash flow
analysis, based on estimated borrowing rates currently available
to the Partnership.
Net Income (Loss) Allocated to Each Unit
----------------------------------------
Net income (loss) allocable to each Limited Partner's Unit is
computed using the weighted average number of units outstanding
in each year.
Cash Equivalents
----------------
The Partnership considers all highly liquid investments with
original maturities of three months or less at the time of
purchase to be cash equivalents.
Reclassifications
-----------------
Certain amounts from 1997 have been reclassified to conform to
the 1998 presentation.
F - 10
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------ -----------------------------------------------------------
(Continued)
Segment Reporting
-----------------
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which is effective for years beginning
after December 15, 1997. SFAS 131 established standards for the
way that public business enterprises report information about
operating segments in annual financial statements and requires
that those enterprises report selected information about
operating segments in interim financial reports. It also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Partnership
has one reportable segment, residential real estate. The
Partnership evaluates performances based on net operating
income, which is income before depreciation, amortization,
interest and non-operating items.
Note 2 - MORTGAGE PAYABLE
- ------ ----------------
During 1993, the Partnership refinanced the mortgage encumbering
the Hunters Creek property by obtaining a $4,100,000 mortgage.
The mortgage balance outstanding is $3,916,472 and $3,955,975 at
December 31, 1998 and 1997, respectively. Monthly installments
totaling $34,535 of principal interest at 9.52% per annum are
due through March 1, 2000, with a balloon payment of
approximately $3,833,000. It is management's estimate that the
carrying amount of the Partnership's mortgage payable
approximates its fair value.
Annual principal payments are due as follows:
1999 $ 43,435
2000 3,873,037
--------------------
$ 3,916,472
====================
Note 3 - RELATED PARTY TRANSACTIONS
- ------ --------------------------
The Partnership has incurred charges and made commitments to
companies affiliated by common ownership and management with
WSLP. Related party transactions with WSLP and its affiliates
include the following:
F - 11
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
Note 3 - RELATED PARTY TRANSACTIONS (Continued)
- ------ --------------------------------------
(a) On October 28, 1997, Insignia Financial Group, Inc.
("Insignia") acquired 100% of the Class B Stock of
First Winthrop Corporation, an affiliate of the
General Partner. On October 1, 1998, Insignia merged
with and into AIMCO. As a result, AIMCO controls the
General Partner of the Partnership.
(b) Investor servicing fees paid or accrued by the
Partnership to affiliates of the General Partner,
totaled $18,342 and $31,031 during the years ended
December 31, 1998 and 1997, respectively, and are
included in management fees.
(c) The Partnership pays to an affiliate of the general
partner property management fees equal to 5% of gross
revenue, as defined. Management fees paid to an
affiliate were $127,971 and $26,401 for the years
ended December 31, 1998 and 1997, respectively.
(d) In accordance with the Agreement, the General Partner
received $1,504 in cash distributions for the year
ended December 31, 1998.
(e) In connection with the sale of the Partnership's
Copper Croft and Greenbyre properties, an affiliate
of the General Partner received sales commissions
totaling $130,500 for the year ended December 31,
1998.
Note 4 - DISTRIBUTIONS
- ------ -------------
In 1998, the Partnership distributed $9,471,513 ($264.56 per
unit) to Unit Holders. This distribution was comprised of
proceeds from property sales and cash flow from operations. No
cash distributions were made in 1997.
F - 12
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
Note 5 - RECONCILIATION TO THE INCOME TAX METHOD OF ACCOUNTING
- ------ -----------------------------------------------------
The differences between the accrual method of accounting for
income tax reporting and the accrual method of accounting used
in the financial statements are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
<S> <C> <C>
Net income - financial statements $ 2,414,416 $ 954,043
Differences resulted from:
Depreciation (138,844) (96,262)
Gain on disposal of property 144,982 (834,019)
Other 7,455 (16,612)
--------------------- ---------------------
Net income - income tax method $ 2,428,009 $ 7,150
===================== =====================
Partners' capital - financial statements $ 2,460,270 $ 9,529,897
Differences resulted from:
Depreciation (3,304,146) (2,640,519)
Offering costs 1,706,304 1,706,304
Recapitalization of Partnership (797,521) (1,478,434)
Section 734 step-up 2,179,679 2,179,679
Adjustment due to foreclosure of property (10,605) (10,605)
Other (3,150) 543
--------------------- ---------------------
Partners' capital - income tax method $ 2,230,831 $ 9,286,865
===================== =====================
</TABLE>
The difference between investment rental property for income tax
and financial statement purposes for 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
---------------------- ---------------------
<S> <C> <C>
Investment in rental property - financial
statements $ 5,480,951 $ 11,904,702
Investment in rental property - income tax
method 3,757,726 10,228,374
---------------------- ---------------------
$ 1,723,225 $ 1,676,328
====================== =====================
</TABLE>
Note 6 - GAIN ON SALE AND EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT
- ------ -------------------------------------------------------------
On August 13, 1998, the Partnership sold its Copper Croft
Apartments property to an unaffiliated third party for a
purchase price of $3,200,000. After closing costs, the
Partnership received net proceeds of $2,984,900. For financial
reporting purposes, the sale resulted in a gain of approximately
$511,000.
F - 13
<PAGE>
SOUTHEASTERN INCOME PROPERTIES II LIMITED PARTNERSHIP
-----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
Note 6 - GAIN ON SALE AND EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT
------ -------------------------------------------------------------
(Continued)
-----------
On December 1, 1998, the Partnership sold The Greenbyre
Apartments property to an unaffiliated third party for a
purchase price of $5,550,000. After closing costs, the
Partnership received net proceeds of $5,246,400. For financial
reporting purposes, the sale resulted in a gain of approximately
$1,553,000.
The mortgage loan on the Partnership's St. Michaels property
matured June 1, 1997. As a result of the principal balance on
the mortgage loan being in excess of the property's value, the
Partnership was unable to refinance such loan or sell the
property at a value sufficient to satisfy the loan. As a result,
the mortgage lender foreclosed on the property as of August 1,
1997. The Partnership recognized an extraordinary gain on
extinguishment of debt of $757,801 during the year ended
December 31, 1997.
Note 7 - SUBSEQUENT EVENT
- ------ ----------------
The Partnership has entered into an agreement with an
unaffiliated third party to sell the Hunters Creek Apartments
property, the only remaining property in the Partnership, for a
sales price of $7,750,000. The sale is conditioned upon the
buyer being able to assume the existing loan encumbering the
property. It is expected that this sale, if consummated, will
close during the second quarter of 1999. There can be no
assurance, however, that this sale will be consummated or, if
consummated, that it will be sold at the current selling price.
For financial statement purposes, the sale will result in a gain
in 1999. Upon sale of the remaining property, the Partnership
will be liquidated.
F - 14
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Effective January 4, 1999, the Registrant dismissed its prior
Independent Auditors, Reznick, Fedder and Silverman ("Reznick") and retained
as its new Independent Auditors, Imowitz Koenig & Co., LLP ("Imowitz").
Reznick's Independent Auditors' Report on the Registrant's financial
statements for calendar year ended December 31, 1997, did not contain an
adverse opinion or a disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope or accounting principles. The decision to
change Independent Auditors was approved by the Registrant's managing general
partner's directors. During calendar year ended 1996 and 1997 and through
January 4, 1999, there were no disagreements between the Registrant and
Reznick on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope of procedure which disagreements if
not resolved to the satisfaction of Reznick, would have caused it to make
reference to the subject matter of the disagreements in connection with its
reports.
Effective January 4, 1999, the Registrant engaged Imowitz as its
Independent Auditors. The Registrant did not consult Imowitz regarding any of
the matters or events set forth in Item 304(a)(2) of Regulation S-B prior to
January 4, 1999.
26
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant.
(a) Identification of Directors and Executive Officers.
The Registrant has no officers or directors. The Managing General
Partner manages and controls substantially all of the Registrant's affairs and
has general responsibility and ultimate authority in all matters affecting its
business. As of March 1, 1999, the names of the directors and executive
officers of Eight Winthrop, the general partner of the Managing General
Partner, and the position held by each of them, are as follows:
<TABLE>
<CAPTION>
Position Held with the Managing Has Served as a Director or
Name General Partner Officer Since
- ------------------ ------------------------------- ---------------------------
<S> <C> <C>
Michael L. Ashner Chief Executive Officer and Director 1-96
Thomas C. Staples Chief Financial Officer 1-99
Peter Braverman Executive Vice President and Director 1-96
Carolyn Tiffany Chief Operating Officer and Clerk 10-95
</TABLE>
Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") and the Managing
General Partner since January 15, 1996. From June 1994 until January 1996, Mr.
Ashner was a Director, President and Co-chairman of National Property
Investors, Inc., a real estate investment company ("NPI"). Mr. Ashner was also
a Director and executive officer of NPI Property Management Corporation ("NPI
Management") from April 1984 until January 1996. In addition, since 1981 Mr.
Ashner has been President of Exeter Capital Corporation, a firm which has
organized and administered real estate limited partnerships.
Thomas C. Staples, age 43, has been the Chief Financial Officer of
WFA since January 1, 1999. From March 1996 through December 1998, Mr. Staples
was Vice President/Corporate Controller of WFA. From May 1994 through February
1996, Mr. Staples was the Controller of the Residential Division of Winthrop
Management.
Peter Braverman, age 47, has been a Vice President of WFA and the
Managing General Partner since January 1996. From June 1995 until January
1996, Mr. Braverman was a Vice President of NPI and NPI Management. From June
1991 until March 1994, Mr. Braverman was President of the Braverman Group, a
firm specializing in management consulting for the real estate and
construction industries. From 1988 to 1991, Mr. Braverman was a Vice President
and
27
<PAGE>
Assistant Secretary of Fischbach Corporation, a publicly traded,
international real estate and construction firm.
Carolyn Tiffany, age 32, has been employed with WFA since January
1993. From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and
Associate in WFA's accounting and asset management departments. Ms. Tiffany
was a Vice President in the asset management and investor relations
departments of WFA from October 1995 to December 1997, at which time she
became the Chief Operating Officer of WFA.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered
pursuant to Section 12(g) of the Securities and Exchange Act of 1934, or are
subject to the reporting requirements of Section 15(d) of such Act: Winthrop
Partners 79 Limited Partnership; Winthrop Partners 80 Limited Partnership;
Winthrop Partners 81 Limited Partnership; Winthrop Residential Associates I, A
Limited Partnership; Winthrop Residential Associates II, A Limited
Partnership; Winthrop Residential Associates III, A Limited Partnership; 1626
New York Associates Limited Partnership; 1999 Broadway Associates Limited
Partnership; Nantucket Island Associates Limited Partnership; One Financial
Place Limited Partnership; Presidential Associates I Limited Partnership;
Riverside Park Associates Limited Partnership; Springhill Lake Investors
Limited Partnership; Twelve AMH Associates Limited Partnership; Winthrop
California Investors Limited Partnership; Winthrop Growth Investors I Limited
Partnership; Winthrop Interim Partners I, A Limited Partnership; and
Southeastern Income Properties Limited Partnership.
Except as indicated above, neither the Partnership nor the Managing
General Partner has any significant employees within the meaning of Item
401(b) of Regulation S-B. There are no family relationships among the officers
and directors of the Managing General Partner.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Registrant under Rule 16a-3(e) during the Registrant's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Registrant with respect to its most recent fiscal year, the Registrant is not
aware of any director, officer, beneficial owner of more than ten percent of
the units of limited partnership interest in the Registrant that failed to
file on a timely basis, as disclosed in the above Forms, reports required by
section 16(a) of the Exchange Act during the most recent fiscal year or prior
fiscal years.
Item 10. Executive Compensation.
The Registrant is not required to and did not pay any compensation to
the officers or directors of Eight Winthrop. Eight Winthrop does not presently
pay any compensation to any of its officers and directors (See "Item 12,
Certain Relationships and Related Transactions").
28
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security Ownership of Certain Beneficial Owners.
No person or group is known by the Registrant to be the beneficial
owner of more than 5% of the outstanding Units as of March 15, 1999. Under the
Registrant's partnership agreement, the voting rights of the Limited Partners
are limited and, in some circumstances, are subject to the prior receipt of
certain opinions of counsel or judicial decisions.
(b) Security Ownership of Management.
As of March 15, 1999, no officers, directors or partners of WFA, WSLP
or Eight Winthrop own any Units of the Registrant.
(c) Changes in Control.
As of March 15, 1999, there exists no arrangement known to the
Registrant the operation of which may at a subsequent date result in a change
in control of the Registrant, other than the following:
In connection with the withdrawal of the Original General Partner and
the substitution of WSLP as the Managing General Partner, WSLP entered into
certain loan arrangements with NLI's predecessor, including the pledge of its
general partnership interest. In the event NLI was successful in enforcing its
remedies under the security agreement, NLI may claim an interest in the
general partnership interest of the Registrant. WSLP disputes the validity of
the security interest, and would vigorously defend any action, and raise,
among other meritorious defenses, the fact that the transfer of the general
partnership interest requires the consent of a majority of Unit holders.
Item 12. Certain Relationships and Related Transactions.
Under the Registrant's partnership agreement, the general partners
and their affiliates are entitled to receive various fees, commissions, cash
distributions, allocations of taxable income or loss and expense
reimbursements from the Registrant.
29
<PAGE>
The following table sets forth the amounts of the fees, commissions
and cash distributions which the Registrant paid to or accrued for the account
of the Managing General Partner and its affiliates for the years ended
December 31, 1997, and 1998:
Type of Compensation 1997 1998
-------------------- -------- --------
Cash Distribution (1) $ -- $ 1,504
Investor Servicing Fee (2) 31,031 $ 18,342
Sales Commission(3) -- 130,500
Property Management Fees(4) 26,401 127,971
-------- --------
TOTAL $ 57,432 $278,317
======== ========
- ----------------
(1) Equal to .12% of cash flow distributed to all partners of the
Registrant.
(2) Equal to 1.0% of gross collected revenues of the Registrant's
properties.
(3) Equal to 1.5% of gross sales proceeds from the sale of Greenbryre
Apartments and Copper Creek Apartments.
(4) Equal to 5% of gross revenue from the properties.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits - The Exhibits listed in the accompanying Index to
Exhibits are filed as part of this Annual Report and incorporated in this
Annual Report as set forth in said index.
(b) Reports on Form 8-K:
A report on Form 8-K was filed on December 10, 1998 with respect to the sale
of Greenbryre Apartments (Item 2)
A report on Form 8-K was filed on January 8, 1999 with respect to the
Registrant's change in accountants (Item 4).
30
<PAGE>
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.
SOUTHEASTERN INCOME PROPERTIES
LIMITED PARTNERSHIP
By: Winthrop Southeastern Limited
Partnership,
Its Managing General Partner
By: Eight Winthrop Properties, Inc.,
Its Managing General Partner
By: /s/ Michael L. Ashner
-------------------------
Michael L. Ashner
Chief Executive Officer
Date: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature/Name Title Date
- -------------- ----- ----
/s/ Michael Ashner Chief Executive Officer March 29, 1999
- ------------------ and Director
Michael Ashner
/s/ Thomas Staples Chief Financial Officer March 29, 1999
- -------------------
Thomas Staples
31
<PAGE>
Index to Exhibits
Exhibit
Number Document
2.1 Agreement and Addendum to Agreement by and among Glade M.
Knight ("Knight"), Ben T. Austin, III ("Austin"), Winthrop
Southeast Limited Partnership ("WSLP") and Investors Savings
Bank, F.S.B. ("ISB") (the "Agreement") dated as of August 8,
1991 and effective as of August 16, 1991. [The exhibits to
the Agreement have been omitted from the Agreement and are
listed in the Agreement.] (Exhibit 2.1)(5)
2.2 Supplemental Agreement by and among WSLP, Knight, and ISB
(the "Knight Agreement") dated as of August 8, 1991 and
effective as of August 16, 1991. [The exhibits to the Knight
Agreement have been omitted from the Knight Agreement and
are listed in the Knight Agreement.] (Exhibit 2.2)(5)
2.3 Supplemental Agreement and Addendum to Supplemental
Agreement by and among WSLP, Austin and ISB dated as of
August 8, 1991 and effective as of August 16, 1991. (Exhibit
2.3)(5)
2.4 Employment Agreement by and between WSLP and Austin dated as
of August 8, 1991 and effective as of August 16, 1991.
(Exhibit 2.4)(5)
2.5 Supplemental Agreement by and between WSLP and ISB dated as
of August 8, 1991 and effective as of August 16, 1991.
(Exhibit 2.5)(5)
3.1 Amended and Restated Agreement of Limited Partnership of
Southeastern Income Properties II Limited Partnership.
(Exhibit 3.1)(2)
3.2 First Amendment to Amended and Restated Agreement of Limited
Partnership of Southeastern Income Properties II Limited
Partnership. (Exhibit 3.9)(1)
3.3 Second Amendment to Amended and Restated Agreement of
Limited Partnership of Southeastern Income Properties II
Limited Partnership. (Exhibit 3.10)(1)
3.4 Third Amendment to the Amended and Restated Agreement of
Limited Partnership of Southeastern Income Properties II
Limited Partnership. (Exhibit 3.11)(1)
3.5 Fourth Amendment to the Amended and Restated Agreement of
Limited Partnership of Southeastern Income Properties II
Limited Partnership. (Exhibit 3.12)(1)
32
<PAGE>
3.6 Fifth Amendment to the Amended and Restated Agreement of
Limited Partnership of Southeastern Income Properties II
Limited Partnership. (Exhibit 3.6)(3)
3.7 Sixth Amendment to the Amended and Restated Agreement of
Limited Partnership of Southeastern Income Properties II
Limited Partnership. (Exhibit 3.7)(3)
3.8 Seventh Amendment to the Amended and Restated Agreement of
Limited Partnership of Southeastern Income Properties II
Limited Partnership. (Exhibit 3.8)(7)
10.1 Apartment Management Agreement, dated February 12, 1992
between the Registrant and Winthrop Management (for Hunters
Creek Apartments). (Exhibit 10.5)(6)
10.2 Properties Acquisition Agreement between Southeastern Income
Properties II Limited Partnership and Knight Austin
Corporation. (Exhibit 10.2)(2)
10.3 Real Estate Consulting Agreement between Southeastern Income
Properties II Limited Partnership and WFS Realty
Corporation. (Exhibit 10.3)(2)
10.4 Repair Supervisory Contract. (Exhibit 10.6)(4)
10.5 Supervisory Insurance Adjustment Contract. (Exhibit 10.7)(4)
10.6 Mortgage Brokerage and Consulting Agreement. (Exhibit
10.8)(4)
27 Financial Data Schedule 35
- ----------------------------------
(1) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's registration statement on
Form S-11 (Registration No. 33-17659).
(2) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's 1987 Annual Report.
(3) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's 1988 Annual Report.
(4) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's 1989 Annual Report.
(5) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's Current Report on Form 8-K on
September 3, 1991.
33
<PAGE>
(6) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's 1991 Annual Report.
(7) Incorporated by reference to the exhibit shown in parentheses filed
with the Commission in the Registrant's 1992 Annual Report filed on
Form 10-K.
34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Southeastern Income Properties Limited Partnership and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 893,371<F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,309,649
<DEPRECIATION> (2,215,533)
<TOTAL-ASSETS> 4,282,394
<CURRENT-LIABILITIES> 0
<BONDS> 2,698,428
<COMMON> 0
0
0
<OTHER-SE> 1,287,995
<TOTAL-LIABILITY-AND-EQUITY> 4,282,394
<SALES> 0
<TOTAL-REVENUES> 8,500,195<F2>
<CGS> 0
<TOTAL-COSTS> 2,897,008
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 536,681
<INCOME-PRETAX> 5,036,132
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,036,132
<DISCONTINUED> 0
<EXTRAORDINARY> (205,920)
<CHANGES> 0
<NET-INCOME> 4,830,162
<EPS-PRIMARY> 95.39
<EPS-DILUTED> 95.39
<FN>
<F1>
Cash includes $293,363 of restricted cash.
<F2>
Includes $4,740,546 of gain on sale of properties.
</FN>
</TABLE>
