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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
--- OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934.
COMMISSION FILE NUMBER: 0-17680 (FORMERLY 33-20255)
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SOUTHEAST ACQUISITIONS II, L.P.
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(Name of issuer in its charter)
Delaware 23-2498841
(State of incorporation) (IRS Employer Identification organization Number)
301 South Perimeter Park Drive
Nashville, Tennessee 37211
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(Address of principal executive offices)
Issuer's telephone no., including area code: (615) 833-8716
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Securities registered pursuant to Section 12(b) of the Act.
Name of each exchange: None
Title of each Class on which registered: Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units $1,000 Per Unit
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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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Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained in this form, and no disclosure will be contained, to the best
of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS...............................................................................1
Background.............................................................................1
Material Recent Developments...........................................................1
Employees..............................................................................2
Competition............................................................................2
Trademarks and Patents.................................................................2
ITEM 2. PROPERTIES.............................................................................2
ITEM 3. LEGAL PROCEEDINGS......................................................................4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................4
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP INTEREST
AND RELATED SECURITY HOLDER MATTERS....................................................5
ITEM 6. SELECTED FINANCIAL DATA................................................................5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..............................................................5
Background.............................................................................5
Results of Operations..................................................................5
1997 Compared to 1996..................................................................6
1996 Compared to 1995..................................................................6
Liquidity and Capital Resources........................................................7
Year 2000 Compliance...................................................................7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...............................................................7
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP....................................7
ITEM 11. EXECUTIVE COMPENSATION.................................................................9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.............................................................................9
Security Ownership of Management.......................................................9
Changes in Control.....................................................................9
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................9
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K......................10
(a) Index to Financial Statements........................................10
(b) Reports on Form 8-K..................................................10
(c) Exhibits (numbered in accordance with Item 601 of Regulation S-K)....10
SIGNATURES
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PART I
ITEM 1. BUSINESS
Background
Southeast Acquisitions II, L.P. (the "Partnership") was formed
on December 14, 1987, as a Delaware limited partnership. The Partnership's
public offering of 9,650 units of limited partnership interest ("Units")
commenced on June 8, 1988 and terminated on July 18, 1988 when all 9,650 Units
were sold. The Partnership has since been scheduled to terminate on December 31,
2000.
The Partnership purchased the following three parcels of
unimproved land in 1988: 135 acres in Rutherford County, Tennessee; 91 acres in
Greenville, South Carolina; and 353 acres in Henry County, Georgia. The
Partnership's primary business objective is to realize appreciation in the value
of the three parcels of unimproved land (each a "Property", collectively the
"Properties"), by holding the Properties for investment and eventual sale,
although there is no assurance that this will be attained. The Partnership has
no plans to develop the Properties, except for land planning, market surveys and
other activities necessary to prepare the Properties for sale.
Since acquisition, the Partnership has sold approximately 27%
of its Tennessee Property, approximately 56% of its South Carolina property, and
approximately 49% of its Georgia Property. All remaining land is currently being
marketed.
The timing and manner of sale will be determined by Southern
Management Group, LLC, the General Partner of the Partnership. The General
Partner generally has the right to sell Property, or portions thereof, without
the consent of the Limited Partners. The Partnership Agreement provides,
however, that a majority in interest of the Limited Partners must consent to the
sale or disposition at one time of 60% or more of the real estate acreage held
by the Partnership as of September 22, 1997 unless the sale or disposition is
being made in connection with the liquidation of the Partnership pursuant to the
Partnership Agreement or in the event that the net proceeds of the sale, when
distributed in accordance with the Partnership Agreement, will be sufficient to
provide the Limited Partners with distributions equal to the Acquisition Cost of
the assets sold.
The General Partner believes that the Partnership's cash
reserves will be sufficient to last for at least three more years assuming no
significant increases in expenses. However, if the reserves are exhausted and
the Partnership is unable to borrow funds, the Partnership may have to sell the
Property on unfavorable terms.
The General Partner has no plans to develop the Properties,
except for activities including rezoning, land planning, market surveys and
other activities necessary to prepare the Properties for sale. There can be no
assurance that necessary funds would be available should it be desirable for the
Partnership to improve the Properties to facilitate their sale.
Material Recent Developments
At a special meeting of Limited Partners held on November 5,
1997, the Partnership Agreement was amended to (i) extend the term of the
Partnership from its original expiration date of December 31, 1998 to December
31, 2000; (ii) substitute Southern Management Group, LLC for Southeast
Acquisitions, Inc as the general partner of the Partnership; (iii) authorize new
commissions and new management fees for the new General Partner; (iii) give the
new General Partner the exclusive right to sell Partnership property; and (iv)
modify the Partnership Agreement to require that a majority in interest of the
Limited Partners must consent to the sale or disposition at one time of 60% or
more of the real estate acreage held by the Partnership as of September 22, 1997
unless the sale or disposition is being made in connection with the liquidation
of the Partnership pursuant to the Partnership Agreement or the net proceeds of
the sale, when distributed in accordance with the Partnership Agreement, will be
sufficient to provide the Limited Partners with distributions equal to the
Acquisition Cost of the assets sold.
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On April 13, 1998, the Partnership closed the sale of one acre
of the Greenville, South Carolina Property for approximately $167,000, less
commissions and expenses.
Employees
The Partnership presently has no employees. The General
Partner manages and controls the affairs of the Partnership. (See Part III, Item
10, Directors and Executive Officers of the Partnership).
Competition
The General Partner believes that there is significant direct
competition within a five mile radius of the Properties. The Properties are
located in three distinct areas of the Southeastern United States.
Trademarks and Patents
The Partnership has no trademarks or patents.
ITEM 2. PROPERTIES
The Partnership owns three tracts of undeveloped land
consisting of approximately 180 acres in Henry County, Georgia, 40 acres in
Greenville, South Carolina, and 98 acres in Rutherford County, Tennessee.
Henry County, Georgia Property:
The Henry County, Georgia Property, after the sale of
approximately 13 acres during 1988 and 1989, 15 acres in 1992, 47 acres in 1993,
73 acres in 1994 and 25 acres in 1995, consists of approximately 180 acres of
undeveloped land, zoned RA/Residential-Agricultural District (which does not
permit construction of multi-family structures), fronting King Mill Road, Iris
Lake Road and Whitaker Road and is located 1.5 miles east of Interstate 75 in
Henry County Georgia, southeast of the center of Metropolitan Atlanta. As a
result of sales of portions of the Property in prior years, the Property now
consists of two non-contiguous parcels.
There were no sales of any of the Henry County Property in
1997. The General Partner has been advised that Rabbit Run Road, running along
the side of one of the parcels, has been selected for paving and improvement by
the local municipality. Paving of the road will permit the site to be platted
and approved as a subdivision.
The former general partner had the Henry County Property
appraised in 1997 by Urban Realty Advisors, Inc. The 1997 appraiser has no
relationship with the former general partner or the current General Partner. The
Property was appraised in 1997 for $585,000 or approximately $3,250 per acre.
The appraiser used the sales comparison (market) approach to value the Property.
Using sales of similar residential land from the surrounding area, the appraiser
determined an estimate of the value for the remaining Property.
The appraised value does not reflect costs, expenses and
commissions, which would be incurred in connection with a sale of the property.
Moreover, appraisals are only an approximation of current market value which can
only be established by an actual sale.
Greenville, South Carolina Property:
The Greenville, South Carolina Property currently consists of
approximately 40 acres of unzoned and generally flat land located approximately
1,200 feet southwest of the I-385 and Fairview Road interchange in Simpsonville,
South Carolina, eight miles southeast of the Greenville city limits and just
outside the town of Simpsonville in Greenville County.
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During 1997 the Partnership sold approximately 1 acre of the
Greenville Property for $160,000 per acre.
The former general partner had the Greenville Property
appraised in 1996 by Owen Faulkner & Associates. The appraiser has no
affiliation with the former general partner or the current General Partner. The
Property, which consisted of approximately 47.5 acres at the time, was appraised
for $3,300,000 or approximately $69,474 per acre. The appraisal used the sales
comparison (market) approach to value. A present value analysis (discounted cash
flow) was also conducted to support the market approach and reconcile the final
value. The appraiser used the then current marketing plan and comparable sales
in the area to estimate the value of the tracts of the Property.
The appraised value does not reflect costs, expenses and
commissions, which would be incurred in connection with a sale of the property.
Moreover, appraisals are only an approximation of current market value which can
only be established by an actual sale.
Rutherford County, Tennessee Property:
The Rutherford County, Tennessee Property is located
approximately 18 miles southeast of the Nashville central business district and
10 miles southeast of the Nashville Metropolitan Airport. Following a sale of
four acres in 1995 and 32.514 acres in 1997, the Property consists of
approximately 49 acres in the northeast quadrant of the I-24/ Sam Ridley
interchange and 49 acres located at the northeast quadrant of the same
interchange, with frontage on the access road. The four acres sold in 1995 were
part of the Property located at the northwest corner of the I-24 interchange.
This land was located along Sam Ridley and was the portion of the Property
located furthest from the interchange itself and was sold for a price of $50,000
per acre. The 32.514 acre sale in 1997 was also at $50,000 per acre.
In an effort to make future development of the Property
easier, all of the Property has now been zoned for commercial use and is located
entirely within the Smyrna City limits rather than part in the City of Smyrna
and part in the City of LaVergne. There is a small cemetery located in the
northwest quadrant of I-24 which the former general partner was aware of at the
time of purchase and which the General Partner does not believe will have an
adverse effect on the Partnership's ability to sell the land. The I-24/Sam
Ridley Parkway interchange is one exit south of Interchange City Industrial
Park, the largest industrial park in the Nashville area, and is currently the
last I-24 interchange south of the city to which sewer lines are available. At
December 31, 1997, I-24 was being widened to three lanes in each direction from
Bell Road in Nashville to the Sam Ridley interchange. This widening will be
completed in 1998.
The former general partner had the Rutherford County Property
appraised in 1996 by Martin Appraisal Services. The appraiser had no affiliation
with the former general partner, although the president of Martin Appraisal
Services served as a vice president of an affiliate of the current General
Partner from April 1984 to August 1987. The Property was appraised in two
tracts; one consisting of 84.5 acres for $2,250,000 or approximately $26,627 per
acre and the second consisting of 45.05 acres for $2,000,000 or approximately
$44,395 per acre. The appraisal used the sales comparison (market) approach to
value the Property in bulk. The appraiser also estimated the value of the
Property if developed and sold as lots to end users. The appraiser was able to
use several sales of land that occurred in the past few years along Sam Ridley
Parkway in the sales comparison approach. In the development analysis, the
appraiser evaluated the sale of tracts of land over a three year period and
estimated the costs of necessary utility improvements. Due to the short period
of time estimated as an absorption period, the appraiser did not discount the
cash flow for the absorption period.
The appraised value does not reflect costs, expenses and
commissions, which would be incurred in connection with a sale of the property.
Moreover, appraisals are only an approximation of current market value which can
only be established by an actual sale.
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ITEM 3. LEGAL PROCEEDINGS
The Partnership is not directly a party to, nor is the
Partnership's Property directly the subject of, any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of Limited Partners was held on November 5,
1997 at which two alternative sets of amendments to the Partnership Agreement
were presented to the Limited Partners for a vote. The matters presented and the
votes cast are set forth below:
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Votes Cast For Votes Cast Against Votes Abstained
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First Alternative Amendments
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Extend the Partnership until
December 31, 2000 5,886.445 293 463.50
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Substitute a new general partner 5,921.445 229 492.50
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Authorize new fees, commissions
and rights to sell Partnership
property for the new general partner 5,823.445 296 523.50
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Give the new general partner the
exclusive right to sell Partnership
Property 5,878.445 277 487.50
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Modify the Limited Partners'
rights to consent to certain sales of
Partnership property 5,880.445 209 553.50
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Second Alternative Amendments
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Extend the Partnership until
December 31, 2000 1,260.945 3,342 2,040
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Authorize new fees, commissions
and rights to sell Partnership
property for the general partner 1,257.945 3,340 2,045
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Eliminate the Limited Partners'
rights to consent to certain sales of
Partnership property 1,467.945 3,234 1,941
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Give the general partner the
exclusive right to sell Partnership
property 4,440.945 3,256 1,946
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP
INTEREST AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units
and it is not anticipated that any will develop in the future. The Partnership
commenced an offering to the public on June 8, 1988 of 9,650 Units of limited
partnership interests. The offering of $9,650,000 was fully subscribed and
terminated on June 24, 1988. As of December 31, 1997, there were 492 limited
partners in the Partnership.
ITEM 6. SELECTED FINANCIAL DATA
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For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
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Operating
Revenues $1,349,188 $1,007,565 $ 925,101 $ 108,787 $1,527,238
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Net Income $1,231,547 $ 947,477 $ 865,009 $ 31,186 $1,443,346
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Net Income per
Unit of Limited
Partnership
Interest $ 127.62 $ 98.18 $ 89.64 $ 3.23 $ 149.57
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Total Assets $2,632,282 $2,693,772 $3,050,057 $3,632,210 $3,618,476
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Long Term
Obligations None None None None None
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Cash
Distributions
Declared per
Unit of Limited
Partnership
Interest $ 150.00 $ 134.00 $ 150.00 None $ 238.00
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Background
The Partnership was formed to acquire and realize appreciation
in the Property by holding it for investment and eventual sale. However, there
can be no assurance that the Partnership's objectives will be realized.
Results of Operations
The Partnership had no operations from the date of its
formation on December 14, 1987 until June 24, 1988 when it acquired the first
Property and sold 3,165 Units of limited partnership interest. During 1988 the
Partnership acquired three additional Properties and sold 6,485 additional Units
of limited partnership interests.
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In 1988 the Partnership purchased 579 acres of unimproved land
at three locations. Status of these Properties at December 31, 1997 are as
follows:
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Property Sold Prior to Remaining Property Held
Place Property Purchased December 31, 1997 for Sale
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Rutherford County, 135 acres 37 acres 98 acres
Tennessee
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Greenville, South
Carolina 91 acres 51 acres 40 acres
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Henry County, Georgia 353 acres 173 acres 180 acres
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1997 Compared to 1996
During 1997 the Partnership sold one acre of the Greenville
Property and 32.514 acres of the Rutherford County Property for a gain of
$1,332,313, compared with $995,155 in gains from sale of Property in 1996. Other
revenues in 1997 consisted of $16,275 in interest income and $600 in partnership
transfer fees, as compared with $9,005 in interest income, $1,250 in transfer
fees and $2,155 in other income in 1996.
Expenses during 1997 included $49,149 of professional and
other fees related to the change in general partner and an amendment of the
partnership agreement in connection with a special meeting of the Limited
Partners in November 1997. There were no such fees in 1996. In addition,
expenses in 1997 included $2,915 in management fees to the General Partner as
compared with $9,374 in management fees to the former general partner in 1996.
The management fees paid to the former general partner provided for a limit on
cumulative management fees over the life of the partnership and this limit was
reached in 1996. The amended partnership agreement approved at the November 5,
1997 special meeting of Limited Partners provides for an annual management fee
of $19,000 to the current General Partner.
General and administrative expenses decreased from $31,249 in
1996 to $22,086 in 1997, primarily due to costs of appraisals in 1996 which were
not recurring expenditures. Real estate taxes increased from $19,116 in 1996 to
$43,110 in 1997 due to a reappraisal of commercial property in Greenville, South
Carolina. Insurance expense in 1997 was approximately the same as in 1996.
1996 Compared to 1995
During 1996, the Partnership sold 14 acres of the Greenville
Property for a gain of $995,155, compared with the sale of 6 acres of the Henry
County Property, 4 acres of the Rutherford County Property and 3 acres of the
Greenville Property for a gain of $920,590 in 1995. Also in 1995 the Partnership
sold 19 acres of the Henry County Property for a loss of $10,389. Other revenues
in 1996 consisted of $9,005 in interest income, $1,250 in partnership transfer
fees and $2,155 in other income, as compared with $14,175 in interest income and
$725 in transfer fees in 1995.
Expenses during 1996 consisted of general and administrative
expenses of $31,249 compared to $21,847 in 1995, primarily due to costs of
appraisals in 1996 which were not recurring expenditures. Real estate taxes
increased from $18,964 in 1995 to $19,116 in 1996. Insurance expense in 1996
decreased slightly from 1995.
Inflation did not have a material impact on operations during
1997, 1996 and 1995.
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Liquidity and Capital Resources
The Partnership had cash reserves of $344,476 at December 31,
1997. The General Partner believes that the Partnership has sufficient cash
reserves to cover normal Partnership expenses for an additional three years.
However, if additional expenses are incurred or should the Partnership decide to
construct infrastructure improvements to enhance the marketability of the
Property, the reserves may be inadequate to cover the Partnership's operating
expenses. If the reserves are exhausted, the Partnership may have to dispose of
some of the Property or incur indebtedness on unfavorable terms.
Year 2000 Compliance
The Partnership's operations are not dependant in any
meaningful way on computer hardware or software. The General Partner has
commenced a process of determining whether the Partnership's accounting systems
and Limited Partner registration records will be negatively affected by the
so-called "Year 2000 Problem". The "Year 2000 Problem" generally refers to the
inability of computer software or hardware to recognize years in more than two
digits. As a result, the year 2000 would appear as "00" and may be viewed by the
computer as the year 1900. This could cause severe negative consequences in some
computer software and hardware. At this time, the Partnership does not
anticipate that any significant expenditures will be required to ensure that the
Partnership's operations are not negatively effected by the Year 2000 Problem.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the year ended
December 31, 1997 together with the report of the Partnership's independent
auditors, Williams Benator & Libby, LLP, and the financial statements for the
years ended December 31, 1996 and 1995, together with the report of the
Partnership's former independent auditors, Ernst & Young LLP, are included in
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Following the Partnership meeting of November 5, 1997, the new
General Partner, Southern Management Group, LLC, changed auditors from Ernst &
Young LLP to Williams Benator & Libby, LLP. There were no disagreements with the
prior accountants on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure in the two years ended
December 31, 1996 or in the interim periods from January 1, 1997 through
November 20, 1997. The reports of the prior accountant for the fiscal years
ended December 31, 1996 and 1995 did not contain an adverse opinion, disclaimer
of opinion, qualification or modification as to uncertainty, audit scope or
accounting principles. The Partnership did not consult with the new accountants
at any time during the years ended December 31, 1996 and 1995 and the subsequent
interim periods through November 20, 1997 regarding either the application of an
accounting principle, the type of opinion that would be rendered on the
Partnership's financial statements, or any matter that was the subject of
disagreement with the Partnership's prior accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership does not have any directors or officers. The
General Partner manages and controls the affairs of the Partnership and has
responsibility for all aspects of the Partnership's operations. The current
members and executive officers and directors of the General Partner are
identified and described below.
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The General Partner is a Tennessee limited liability company
whose members are Richard W. Sorenson, who owns a 51% interest in the General
Partner and Southeast Venture Corporation, a Tennessee corporation which owns
49% of the General Partner.
Mr. Sorenson, age 71, has over 35 years experience in several
real estate disciplines, including land acquisition and development, development
of office buildings, shopping centers, warehouses and medical facilities.
All of these activities occurred in the southeastern United States.
Mr. Sorenson was President of Phoenix Investment Company
("Phoenix"), a publicly owned, Atlanta based real estate development and
investment firm from 1965 to 1970. Concurrent with his employment at Phoenix, he
was President of First Atlanta Realty Fund, a publicly owned real estate
investment trust. During his tenure with the trust, he served as a Trustee of
the National Association of Real Estate Investment Trusts.
Following his departure from Phoenix in 1970, Mr. Sorenson
became Vice President of Cousins Properties in Atlanta, where he was responsible
for development of office buildings, shopping centers and apartments until 1971.
Until forming Southeast Venture Companies ("SV") in 1979, Mr. Sorenson was an
independent real estate developer.
Mr. Sorenson was co-founder of SV in 1979. In 1992,
substantially all of the assets of SV were sold to Southeast Venture
Corporation.
Mr. Sorenson is a graduate of the Northwestern University
Business School with a major in real estate.
The other member of the General Partner is Southeast Venture
Corporation ("SVC"). The officers and key employees of SVC include the
following:
Paul J. Plummer, age 47. Mr. Plummer serves as director of
project management services for SVC. Mr. Plummer is responsible for management,
team structuring, cost control and scheduling of large scale projects for SVC
including office buildings, medical centers, commercial office buildings,
commercial land ventures and build-to-suit projects. Before joining SVC in 1986,
Mr. Plummer served as a partner and director of design for the Nashville-based
architecture and engineering firm of Gresham, Smith and Partners. In that
capacity he was responsible for the design and planning of over 15 major
projects throughout the United States and Saudi Arabia. Mr. Plummer earned his
bachelor of architecture degree from the University of Kentucky and is a member
of the American Institute of Architects.
Wood S. Caldwell, age 44. Mr. Caldwell is responsible for all
site development activities on behalf of commercial and health care clients of
SVC, including managing all design consultants, permitting, scheduling,
budgeting and construction management. He contributes to SVC's development team
in the areas of land planning, zoning, permitting, engineering and construction.
Before joining SV in 1985, Mr. Caldwell served as a professional engineer for
Gresham, Smith and Partners. As the prime site design engineer for Gresham,
Smith and Partners, Mr. Caldwell produced and coordinated site development plans
for over 50 separate medical facilities in over 40 different communities
throughout the southeast. Mr. Caldwell earned his bachelor of engineering degree
from the Vanderbilt University School of Engineering.
Axson E. West, age 43. Mr. West serves as vice president of
brokerage services for SVC, specializing in office and industrial leasing,
improved property sales and land disposition for several commercial and
residential projects. Mr. West has sold real estate and real estate securities
since 1980 and, since joining SV in 1988, he has been responsible for the
disposition of land encompassing industrial, office and retail developments. Mr.
West is director of the Nashville Board of Realtors and president elect of the
board's commercial investment division. He received his bachelor of arts degree
from Vanderbilt University and is a Certified Commercial Investment Member, a
designation of the Commercial Investment Real Estate Institute.
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Cameron W. Sorenson, age 35. Mr. Sorenson serves as director
of vertical development for SVC. He is primarily responsible for providing
development and project management for the clients of SVC. Prior to assuming
these responsibilities, Mr. Sorenson was project director for two large scale
land development ventures for SVC. Prior to joining SV in 1987, Mr. Sorenson was
with Trust Company Bank in Atlanta, as an officer in the National Division,
managing a credit portfolio in excess of $150 million. He received his bachelor
of science degree in finance from the MacIntyre School of Business at the
University of Virginia. Cameron Sorenson is the son of Richard W. Sorenson, the
individual majority member of the General Partner.
ITEM 11. EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1997, the
Partnership did not pay compensation to any officers of the General Partner. The
Partnership paid to the General Partner a management fee of $2,915 in the fiscal
year ended December 31, 1997. See Item 13 of this report, "Certain Relationships
and Related Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31. 1997 no other person or "group" (as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) was
known to the Partnership to benefically own more than 5% of the Units of the
Partnership.
Security Ownership of Management
No individual member, or director or officer of a member, of
the General Partner nor such directors or officers as a group, owns any of the
Partnership's outstanding securities. The General Partner owns a general
partnership interest which entitles it to receive 30% of cash distributions
after the Limited Partners have received cumulative distributions equal to a 10%
non-compounded Cumulative Annual Return on their Adjusted Capital Contribution
plus a return of their Capital Contributions as those terms are defined in the
Partnership Agreement. The General Partner will share in taxable income to
reflect cash distributions or, to the extent there are losses, 1% of such
losses.
Changes in Control
There are no arrangements known to the Partnership that would
at any subsequent date result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From 1988 through 1996, the Partnership paid $18,753 annually
as an administration fee to the former general partner. This fee was computed as
one quarter of one percent of the base cost of the land. The cumulative amount
of such fee could not exceed $150,021 and, as of December 31, 1996, fees charged
since inception amounted to $150,021. As of November 5, 1997, the Limited
Partners voted and agreed to pay the new General Partner, Southern Management
Group, LLC, a fee of $2,915 for the period November 5, 1997 through December 31,
1997 and annual fees of $19,000 from January 1, 1998 through December 31, 2000.
Any fee payments would cease at a date when the Partnership was liquidated.
An affiliate of the General Partner also received a sales
commission of $130,060 in 1997 in connection with the sale of a portion of the
Rutherford County, Tennessee Property.
The General Partner will also receive 30% of cash
distributions after the Limited Partners have received (i) cumulative
distributions equal to a 10% Cumulative Annual Return on their Adjusted Capital
Contributions plus (ii) a return of their Capital Contributions (as those terms
are defined in the Partnership Agreement). During 1997, 1996 and 1995 the
General Partner received no cash distributions.
- 9 -
<PAGE> 13
At the special meeting of Limited Partners held on November 5,
1997, the Partnership Agreement was amended to provide that total compensation
paid to all persons, including the General Partner, for the sale of the
Partnership's property is limited to a competitive real estate commission or
disposition fee not to exceed 10% of the contract price of the sale of the
property, provided that the General Partner or its affiliates would only be
entitled to up to 50% of any such compensation. In addition, the Partnership
Agreement was amended to provide that the General Partner may act as the
exclusive agent for the sale of the Property.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
<TABLE>
<CAPTION>
(a) Index to Financial Statements Page
<S> <C> <C>
Report of Independent Auditors for 1997 F-1
Balance Sheet F-2
Statement of Income F-3
Statement of Partners' Equity (Deficit) F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
Report of Independent Auditors for 1996 and 1995 F-12
Balance Sheets F-13
Statements of Operations F-14
Statements of Partners' Equity (Deficit) F-15
Statements of Cash Flows F-16
Notes to Financial Statements F-17
</TABLE>
Schedules have been omitted because they are
inappropriate, not required, or the information is
included elsewhere in the financial statements or
notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership
during the fourth quarter of 1997, except the
following:
Form 8-K, dated November 5, 1997, relating to change
in General Partner.
Form 8-K, dated November 20, 1997, relating to change
in accountants.
Form 8-K/A, dated December 30, 1997, relating to
change in accountants.
(c) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Exhibit Numbers Description Page Number
- --------------------------------------------------------------------------------
<S> <C> <C>
3.1(a) Certificate of Limited Partnership *
- --------------------------------------------------------------------------------
3.1(b) & (4) Restated Limited Partnership **
Agreement
- --------------------------------------------------------------------------------
3.1 First Amendment to Restated Limited E-1
Partnership Agreement
- --------------------------------------------------------------------------------
9 not applicable
- --------------------------------------------------------------------------------
11 not applicable
- --------------------------------------------------------------------------------
12 not applicable
- --------------------------------------------------------------------------------
</TABLE>
- 10 -
<PAGE> 14
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Exhibit Numbers Description Page Number
- ------------------------------------------------------------------------------------
<S> <C> <C>
13 not applicable
- ------------------------------------------------------------------------------------
16 not applicable
- ------------------------------------------------------------------------------------
18 not applicable
- ------------------------------------------------------------------------------------
19 not applicable
- ------------------------------------------------------------------------------------
22 not applicable
- ------------------------------------------------------------------------------------
24 not applicable
- ------------------------------------------------------------------------------------
25 not applicable
- ------------------------------------------------------------------------------------
27 Financial Data Schedule
- ------------------------------------------------------------------------------------
28 not applicable
- ------------------------------------------------------------------------------------
29 not applicable
- ------------------------------------------------------------------------------------
</TABLE>
* Incorporated by reference to Exhibit 3.1 filed as part of the
Exhibits to the Partnership's Registration Statement on Form
S-18, Registration No. 33-20255.
** Incorporated by reference to Exhibit 3.2 filed as part of the
Partnership's Registration Statement on Form S-18,
Registration No. 33-20255.
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.
SOUTHEAST ACQUISITIONS II, L.P.
a Delaware limited partnership
By: SOUTHERN MANAGEMENT GROUP, LLC
General Partner
By: /s/ Richard W. Sorenson
-------------------------------------
RICHARD W. SORENSON
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard W. Sorenson President, Chief Executive April 15, 1998
- ---------------------------- Officer and Chief Financial Officer
of Southern Management Group, LLC
</TABLE>
- 11 -
<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
Partners
Southeast Acquisitions II, L.P.
Nashville, Tennessee
We have audited the accompanying balance sheet of Southeast Acquisitions II,
L.P. (a Delaware limited partnership) as of December 31, 1997, and the related
statements of income, partners' equity, 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 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Southeast Acquisitions II,
L.P. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ Williams Benator & Libby, LLP
Atlanta, Georgia
January 15, 1998
F-1
<PAGE> 16
BALANCE SHEET
SOUTHEAST ACQUISITIONS II, L.P.
December 31, 1997
ASSETS
<TABLE>
<S> <C>
Land held for sale--Note D $2,287,806
Cash and cash equivalents 344,476
----------
$2,632,282
==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses--Note B $ 52,410
Escrow payable 99,000
Payable to affiliate--Note B 13,954
Partners' equity--Note C:
General partner 9,921
Limited partners (9,650 units outstanding) 2,456,997
----------
2,466,918
----------
$2,632,282
==========
</TABLE>
See notes to financial statements.
F-2
<PAGE> 17
STATEMENT OF INCOME
SOUTHEAST ACQUISITIONS II, L.P.
Year Ended December 31, 1997
<TABLE>
<S> <C>
Revenues:
Gain on sale of land $1,332,313
Interest and other income 16,875
----------
1,349,188
Expenses:
Professional and other fees related to change
in general partner and amendment of
partnership agreement 49,149
General and administrative 22,086
Management fee--Note B 2,915
Real estate taxes 43,110
Insurance 381
----------
117,641
----------
Net income:
General partners 12,315
Limited partners 1,219,232
----------
$1,231,547
==========
Net income per limited partnership unit $ 127.62
==========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 18
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
SOUTHEAST ACQUISITIONS II, L.P.
Year Ended December 31, 1997
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1, 1997 $ (2,394) $ 2,685,263 $ 2,682,869
Distributions -0- (1,447,498) (1,447,498)
Net income for the year ended
December 31, 1997 12,315 1,219,232 1,231,547
-------- ----------- -----------
Balance at December 31, 1997 $ 9,921 $ 2,456,997 $ 2,466,918
======== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 19
STATEMENT OF CASH FLOWS
SOUTHEAST ACQUISITIONS II, L.P.
Year Ended December 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,231,547
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of land (1,332,313)
Net proceeds from sales of land 1,624,987
Increase in accounts payable
and accrued expenses 41,507
Increase in escrow payable 99,000
Increase in payable to affiliate 13,954
-----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,678,682
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to limited partners (1,447,498)
-----------
INCREASE IN CASH AND
CASH EQUIVALENTS 231,184
Cash and cash equivalents at beginning of year 113,292
-----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 344,476
===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
SOUTHEAST ACQUISITIONS II, L.P.
December 31, 1997
NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Southeast Acquisitions II, L.P. ("the Partnership") is a Delaware limited
partnership that was formed to acquire and sell undeveloped land. The
Partnership was formed during December 1987 and received equity contributions
totaling $9,650,000 through the sale of 9,650 limited partnership units during
1988. The Partnership was originally scheduled to terminate on December 31,
1998. However, during November 1997, concurrent with the replacement of the
previous general partner, the term of the Partnership was extended to December
31, 2000.
During 1988, the Partnership purchased undeveloped land as follows:
approximately 135 acres near Nashville, Tennessee, approximately 91 acres in
Greenville, South Carolina, and approximately 353 acres near Atlanta, Georgia.
This land was purchased from an affiliate of the previous general partner. The
three tracts of land are being marketed for sale. At December 31, 1997, the
remaining land consisted of approximately 98 acres of the Tennessee land,
approximately 40 acres of the South Carolina land and approximately 180 acres of
the Georgia land.
The following accounting policies are presented to assist the reader in
understanding the Partnership's financial statements:
Basis of Accounting: The Partnership maintains its accounting records on the
accrual basis of accounting. Sales of land are recognized upon the closing of an
enforceable sales contract and the Partnership's execution of its obligations
under the contract.
Land Held for Sale: Land is carried at the lower of cost or fair value less
estimated cost to sell. The Partnership's land is carried net of the remaining
portion of an original write-down of $3,467,829 that was recognized during 1991.
Income Taxes: Federal and state income taxes have not been provided for in the
financial statements. Under existing law, the Partnership is not treated as a
taxable entity. Rather, each partner must include his allocated share of
Partnership income, loss, gain, deduction, and credit in his individual income
tax return. The write-down of the land's carrying value that has been recorded
for financial statement purposes will not be recognized for income tax purposes
until the land is sold. At December 31, 1997, the remaining portion of the 1991
write-down that had not been recognized for income tax purposes totaled
$2,521,015.
F-6
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS II, L.P.
NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--Continued
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents: For purposes of reporting cash flows, the Partnership
considers all demand deposits and highly liquid investments purchased with an
original maturity of three months or less which can be readily converted to cash
on demand, without penalty, to be cash equivalents. At December 31, 1997, cash
on deposit included approximately $350,000 in excess of federally insured
limits.
NOTE B--RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, the Partnership paid a management fee
of $2,915 to its new general partner, as provided for in the amendment to the
partnership agreement that was adopted during November 1997. No management fees
were paid to the previous general partner since Aggregate management fees that
had been authorized by the original partnership agreement had been satisfied
during a prior year.
The amended partnership agreement provides for annual management fees of $19,000
to be paid to the new general partner through the year ended December 31, 2000.
As of December 31, 1997, the Partnership owed $5,536 to companies related to the
new general partner for legal fees incurred for the change in general partner
and approval of the amendments to the partnership agreement. At December 31,
1997, the Partnership also owed $13,954 to Southeast Acquisitions III, L.P., a
partnership with the same general partner.
During the year ended December 31, 1997, a sales commission of $130,060 was paid
to a company that owns 49% of the new general partner related to a sale of land.
The Partnership agreement provides for reimbursement of expenses incurred by the
general partner related to the administration and operation of the Partnership.
Such reimbursements to the previous general partner totaled $43,440 during the
year ended December 31, 1997. No reimbursements were made to the new general
partner during the year ended December 31, 1997.
F-7
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS II, L.P.
NOTE C--PARTNERS' EQUITY
In accordance with the partnership agreement (as amended in November 1997), cash
distributions and Partnership profits and losses are to be allocated as follows:
(a) Except for distributions in connection with the liquidation of the
Partnership, cash distributions are to be made 100% to the limited
partners until the limited partners have received (i) cumulative
distributions equal to their 10% noncompounded cumulative annual return
on their adjusted capital contribution, as defined ($2,085,202 at
December 31, 1997) plus (ii) a return of their capital contributions
($9,650,000 at December 31, 1997); thereafter, distributions will be
made 70% to the limited partners and 30% to the general partner.
Distributions in connection with the Partnership's liquidation will be
made in accordance with the partners' capital accounts as maintained
for federal income tax purposes.
(b) Profits and losses are to be allocated as provided in the partnership
agreement. Generally, profits will be allocated to the partners to
reflect cash distributions or to offset negative balances in the
partners' capital accounts, but at least 1% of profits will be
allocated to the general partner. Losses will generally be allocated
99% to the limited partners, in proportion to their units, and 1% to
the general partner, or to reduce any positive account balances in the
partners' capital accounts.
Upon Partnership dissolution and termination, the general partner is required to
contribute to the capital of the Partnership the lesser of any negative amount
of its capital account as defined, or 1.01% of the capital contributions made by
the limited partners. Any amount so contributed shall be distributed to the
limited partners in proportion to their positive capital account balances.
During the year ended December 31, 1997, the Partnership paid distributions
against the limited partners' cumulative annual return in accordance with the
partnership agreement of $1,447,498, or $150 per unit.
Cumulative distributions applied against the limited partners' cumulative annual
return through December 31, 1997 totaled $7,083,098, or $734 per unit.
Total compensation paid to all persons, including the new general partner, upon
the sale of the Partnership's property is limited to a competitive real estate
commission or disposition fee not to exceed 10% of the contract price. Any such
commission or disposition fee paid to the general partner would reduce any
distribution which it would otherwise be entitled to pursuant to the partnership
agreement. The general partner or an affiliate may be given an exclusive right
to sell property for the Partnership.
F-8
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS II, L.P.
NOTE D--SUMMARY OF PROPERTY AND ACTIVITY
At December 31, 1997, land consisted of the following:
<TABLE>
<CAPTION>
Gross Amount
at Which Carried at
Description Initial Cost December 31, 1997 Date Acquired
- ------------------------------------------ ------------ ------------------ -------------
<S> <C> <C> <C>
180 acres of unimproved land in
Henry County, Georgia $ 379,794 $ 379,794 July 1988
40 acres of unimproved land in
Greenville, South Carolina 1,107,829 1,107,829 June 1988
98 acres of unimproved land
in Rutherford County, Tennessee 3,321,198 800,183 June 1988
---------- ----------
$4,808,821 $2,287,806
========== ==========
</TABLE>
There were no liens on the land as of December 31, 1997. At December 31, 1997,
the aggregate carrying value of the land for income tax purposes was $4,808,821.
The difference between the carrying value for financial statement purposes and
income tax purposes resulted from a write-down of the Tennessee property's
carrying value that was recorded for financial statement purposes during 1991 as
more fully described in Note A.
F-9
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS II, L.P.
NOTE D--SUMMARY OF PROPERTY AND ACTIVITY--Continued
Land activity for the years ended December 31, 1995, 1996 and 1997 consisted of
the following:
<TABLE>
<S> <C>
Balance at January 1, 1995 $ 3,165,192
Additions -0-
Deductions--cost of land sold (201,272)
-----------
Balance at December 31, 1995 2,963,920
Additions -0-
Deductions--cost of land sold (383,440)
-----------
Balance at December 31, 1996 2,580,480
Additions -0-
Deductions--cost of land sold (292,674)
-----------
Balance at December 31, 1997 $ 2,287,806
===========
</TABLE>
F-10
<PAGE> 25
Southeast Acquisitions II, L.P.
Financial Statements
Years ended December 31, 1996 and 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...........................................F-12
Audited Financial Statements
Balance Sheets...........................................................F-13
Statements of Operations.................................................F-14
Statements of Partners' Equity (Deficit).................................F-15
Statements of Cash Flows ................................................F-16
Notes to Financial Statements............................................F-17
</TABLE>
F-11
<PAGE> 26
Report of Independent Auditors
To the Partners of
Southeast Acquisitions II, L.P.
We have audited the balance sheets of Southeast Acquisitions II, L.P. (a
Delaware limited partnership) as of December 31, 1996 and 1995, and the related
statements of operations, partners' equity (deficit), and cash flows for each of
the three years in the period ended December 31, 1996. 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 Southeast Acquisitions II, L.P.
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 7, 1997
F-12
<PAGE> 27
Southeast Acquisitions II, L.P.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
--------------------------------------------
<S> <C> <C>
ASSETS
Land, net $ 2,580,480 $ 2,963,920
Cash and cash equivalents 113,292 86,137
--------------------------------------------
$ 2,693,772 $ 3,050,057
============================================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accrued expenses $ 10,903 $ 16,877
Due to affiliate - 4,688
Partners' equity (deficit):
General (2,394) (11,869)
Limited (9,650 units authorized, issued and outstanding)
2,685,263 3,040,361
--------------------------------------------
$ 2,693,772 $ 3,050,057
============================================
</TABLE>
See accompanying notes.
F-13
<PAGE> 28
Southeast Acquisitions II, L.P.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Interest and other income $ 12,410 $ 14,900 $ 9,022
Net gain on sales of land 995,155 910,201 99,765
-----------------------------------------------------------------
1,007,565 925,101 108,787
Expenses:
General and administrative 31,249 21,847 29,603
Management fee 9,374 18,753 18,753
Real estate taxes 19,116 18,964 22,528
Insurance 349 528 6,717
-----------------------------------------------------------------
60,088 60,092 77,601
-----------------------------------------------------------------
Net Income:
Allocated to General Partner 9,475 8,650 312
Allocated to Limited Partners
938,002 856,359 30,874
-----------------------------------------------------------------
$ 947,477 $ 865,009 $ 31,186
=================================================================
Net income per limited
partnership unit $ 98.18 $ 89.64 $ 3.23
=================================================================
</TABLE>
See accompanying notes.
F-14
<PAGE> 29
Southeast Acquisitions II, L.P.
Statements of Partners' Equity (Deficit)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ (20,831) $ 3,600,628 $ 3,579,797
Net income 312 30,874 31,186
-----------------------------------------------------------
Balance, December 31, 1994 (20,519) 3,631,502 3,610,983
Capital distribution - (1,447,500) (1,447,500)
Net income 8,650 856,359 865,009
-----------------------------------------------------------
Balance, December 31, 1995 (11,869) 3,040,361 3,028,492
Capital distributions - (1,293,100) (1,293,100)
Net income 9,475 938,002 947,477
-----------------------------------------------------------
Balance, December 31, 1996 $ (2,394) $ 2,685,263 $ 2,682,869
===========================================================
</TABLE>
See accompanying notes.
F-15
<PAGE> 30
Southeast Acquisitions II, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 947,477 $ 865,009 $ 31,186
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sales of land (995,155) (910,201) (99,765)
Proceeds from sales of land parcels 1,378,595 1,111,473 302,902
Changes in operating assets and
liabilities:
Accrued expenses (5,974) 338 (17,452)
Due to affiliate (4,688) - -
-----------------------------------------------------
Net cash provided by operating activities 1,320,255 1,066,619 216,871
FINANCING ACTIVITIES
Distribution to limited partners (1,293,100) (1,447,500) -
-----------------------------------------------------
Net cash used in financing activities (1,293,100) (1,447,500) -
-----------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 27,155 (380,881) 216,871
Cash and cash equivalents, beginning of year 86,137 467,018 250,147
-----------------------------------------------------
Cash and cash equivalents, end of year $ 113,292 $ 86,137 $ 467,018
=====================================================
</TABLE>
See accompanying notes.
F-16
<PAGE> 31
Southeast Acquisitions II, L.P.
Notes to Financial Statements
December 31, 1996
1. DESCRIPTION OF BUSINESS
Southeast Acquisitions II, L.P. is a Delaware limited partnership. The General
Partner (Southeast Acquisitions, Inc.) is an indirect wholly-owned subsidiary of
The Fidelity Mutual Life Insurance Company (in Rehabilitation). Per the
Partnership Agreement, the Partnership shall exist for a term ending December
31, 1998, at which time it shall be dissolved.
Fidelity Mutual Life Insurance Company (the Company) was placed into
Rehabilitation, as defined, by the Commonwealth Court of Pennsylvania on
November 6, 1992 and it remains in Rehabilitation as of the report date. The
General Partner does not at this time expect that the Rehabilitation of the
Company will negatively impact the operation of either the General Partner or
the Partnership. The Company's Rehabilitation Plan, originally filed in June
1994, was amended in January 1995 and again in June 1996.
The Partnership purchased approximately 86 acres of unimproved land near
Nashville, Tennessee on June 24, 1988 from Southeastern Land Fund, Inc. (SELF),
an affiliate of the General Partner. An additional 49 acres of unimproved land
adjacent to the first 86 acres was purchased from SELF on June 29, 1988. On July
6, 1988, the Partnership purchased approximately 91 acres of unimproved land in
Greenville, South Carolina, and on July 18, 1988, purchased approximately 353
acres of unimproved land near Atlanta, Georgia from SELF. The four tracts of
unimproved land are being marketed for sale and will be sold as conditions
warrant.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership maintains its accounting records on the accrual basis of
accounting.
LAND
Land is carried at the lower of cost or fair value less estimated cost to sell.
The carrying value of land, as disclosed on the balance sheet, is net of a
$3,467,829 write-down in 1991.
CASH EQUIVALENTS
For purposes of reporting cash flows, short-term investments which have an
original maturity of three months or less are considered cash equivalents.
F-17
<PAGE> 32
Southeast Acquisitions II, L.P.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
In conformity with the Internal Revenue Code and applicable state and local tax
statutes, taxable income or loss of the Partnership is required to be reported
in the tax returns of the partners in accordance with the term of the
Partnership Agreement. Accordingly, no provision has been made in the
accompanying financial statements for any federal, state, or local income tax.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect various amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. RELATED-PARTY TRANSACTIONS
Management fees were paid to the General Partner totaling $9,374, $18,753, and
$18,753 in 1996, 1995, and 1994, respectively. The annual management fee is
computed as one-quarter of one percent of the original cost of the land. The
cumulative amount of such fees may not exceed $150,021 as provided by the
Partnership Agreement, and such fees charged since inception amount to $150,021.
4. PARTNERS' EQUITY
The Partnership received equity contributions totaling $9,650,000 through the
sale of 9,650 limited partnership units in 1988.
During 1995, the Partnership made distributions to the limited partners in the
amount of $150 per unit, or $1,447,500. The distributions represented a payment
of earnings in the amount of $88.74 per unit, or $856,000 and a return of basis
in the amount of $61.26 per unit, or $591,000.
During 1996, the Partnership made distributions to the limited partners in the
amount of $134 per unit, or $1,293,100. The distributions represented a payment
of earnings in the amount of $97.20 per unit, or $938,000 and a return of basis
in the amount of $36.80 per unit, or $355,000.
F-18
<PAGE> 33
Southeast Acquisitions II, L.P.
Notes to Financial Statements (continued)
4. PARTNERS' EQUITY (CONTINUED)
Cumulative distributions through December 31, 1996, in the amount of $584 per
unit, or $5,635,600 represented a payment of earnings in the amount of $218 per
unit, or $2,104,000 and a return of basis in the amount of $366 per unit, or
$3,531,600.
In accordance with the Partnership Agreement, cash distributions and profits or
losses for each year of the Partnership shall be allocated as follows:
(a) Cash Distributions--Except for distributions in connection with the
liquidation of the Partnership, cash distributions, if any, will be
made 100% to the limited partners until the limited partners have
received (i) cumulative distributions equal to their 10% noncompounded
cumulative annual return on their adjusted capital contributions, as
defined ($2,567,700 at December 31, 1996) plus (ii) a return of their
capital contributions ($9,650,000 at December 31, 1996); thereafter,
distributions will be made 70% to the limited partners and 30% to the
General Partner. Distributions in connection with the Partnership's
liquidation will be made in accordance with the partners' capital
accounts as maintained for federal income tax purposes.
(b) Profits and Losses--Profits generally will be allocated to the partners
to reflect cash distributions, but at least 1% of profits will be
allocated to the General Partner. Losses, if any, generally will be
allocated 99% to the limited partners and 1% to the General Partner. In
no event will the General Partner be allocated less than 1% of profits
or losses for any year.
The Partnership Agreement also provides that upon Partnership dissolution or
termination, the General Partner shall contribute to the capital of the
Partnership the lesser of any negative amount of its capital account, as
defined, or 1.01% of the capital contributions made by the limited partners. Any
amount so contributed shall be distributed to the limited partners in proportion
to their positive capital account balances.
F-19
<PAGE> 1
EXHIBIT 3.1(C)
FIRST ALTERNATIVE AMENDMENTS
SEA II
FIRST AMENDMENT TO
RESTATED LIMITED PARTNERSHIP AGREEMENT OF
SOUTHEAST ACQUISITIONS II, L.P.
This FIRST AMENDMENT (this "Amendment"), dated as of November 5, 1997
is to the Restated Limited Partnership Agreement (the "Partnership Agreement")
of Southeast Acquisitions II, L.P. (the "Partnership"), dated June 24, 1988, by
and between SOUTHEAST ACQUISITIONS, INC., a Delaware corporation, as general
partner (the "General Partner") and the Persons admitted as limited partners
pursuant to the Partnership Agreement.
WHEREAS, a special meeting (the "Meeting") of the Limited Partners was
duly held on November 5, 1997; and
WHEREAS, at the Meeting a majority in interest of the Limited Partners
have voted to adopt the following Amendments to the Partnership Agreement.
NOW, THEREFORE, the Amendments are adopted and are effective as of
November 5, 1997.
1. Southeast Acquisitions, Inc. is hereby removed as the General
Partner of the Partnership, and Southern Management Group, LLC, a Tennessee
Limited Liability Company is substituted therefor as successor General Partner
of the Partnership. On and after the date of this Amendment, except as the
context may otherwise require, all references to the General Partner in the
Partnership Agreement shall mean Southern Management Group, LLC.
2. Section 1.3 is amended in its entirety to read as follows:
"1.3. TERM. The Partnership shall exist for a term ending
December 31, 2000, at which time it shall be dissolved, unless sooner
dissolved or terminated as provided in this Agreement (the "Term")."
3. Section 1.4 is hereby amended in its entirety to read as follows:
"1.4. PLACE OF BUSINESS. The principal place of business of
the Partnership shall be at 301 South Perimeter Park Drive, Suite 115,
Nashville, TN 37211 or at another location selected by the General
Partner, who shall give notice of any change to the Limited Partners.
The Partnership may have such additional offices or places of business
as the General Partner may determine."
E-1
<PAGE> 2
4. The first sentence of Section 2.1 is amended in its entirety to read
as follows:
"2.1. GENERAL PARTNER. The General Partner is Southern
Management Group, LLC, a Tennessee Limited Liability Company, 301 South
Perimeter Park Drive, Suite 115, Nashville, Tennessee."
5. Section 4.2(a). is amended by adding at the end of the Section the
following:
"(xiii) Reserve to itself or an Affiliate or enter into a
contract for an exclusive right to sell or exclusive employment to sell
property for the Partnership."
6. Section 4.3(b) is hereby amended in its entirety to read as follows:
"(b) Without the consent of a majority in interest of the
Limited Partners, the General Partner shall not have the authority to:
(i) sell or otherwise dispose of at one time all or
substantially all the assets of the Partnership, except that the
General Partner may sell such assets without such consent (A) in
connection with the liquidation of the Partnership under Section 6.3
or (B) if the net proceeds of such sale, when distributed in
accordance with the Section 3.1, will be sufficient to provide the
Limited Partners with distributions equal to the Acquisition Cost of
the assets sold."
7. Section 4.3(g) is deleted in its entirety and clauses 4.3(h) through
(t) are hereby renumbered 4.3(g) through (s) respectively.
8. Section 4.5(b) is amended in its entirety to read as follows:
"(b) For the services and activities to be performed by the
General Partner in connection with the administration and management of
the Partnership from November 5, 1997 to the end of the Term, the
General Partner shall receive a management fee of $19,000 per year
(prorated for a portion of a year) during the Term of the Partnership.
The management fee shall be paid to the General Partner for such
services on conclusion of each calendar quarter. If the Partnership
does not have sufficient cash to pay the management fee for any
quarter, such fee shall be accrued (without interest) as a debt of the
Partnership, payable out of Sale or Financing proceeds prior to any
Partner receiving their distributions in accordance with this
Agreement."
9. Section 4.5(c) shall be amended in its entirety to read as follows:
"(c) The General Partner or its Affiliates may receive the
entire competitive real estate commission or disposition fee (that real
estate or brokerage commission or disposition fee paid for the purchase
or sale of property which is reasonable, customary and competitive in
light of the size, type and location of the property) with respect to
sales
E-2
<PAGE> 3
of Partnership property following November 5, 1997, which are not under
contract as of such date. The total compensation paid to all Persons
for the sale of Partnership property shall be limited to a competitive
real estate commission or disposition fee not to exceed 10% of the
contract price for the sale of the property. The commission or
disposition fee shall be paid upon sale of the property prior to any
distribution to the Partners in accordance with this Agreement;
provided that the amount of any such commission or disposition fee paid
to the General Partner shall reduce any distribution to which it would
otherwise be entitled pursuant to this Agreement."
10. Section 11.1 is amended by adding the following definition as the
first definition in the Section:
"Acquisition Cost" with respect to a Partnership asset means
the price originally paid by the Partnership to acquire the asset,
including the value of any mortgages or liens on the asset assumed by
the Partnership at the time of acquisition, excluding points and
prepaid interest.
and by adding the following definition following the definition of "Agreement":
"all or substantially all the assets of the Partnership" means
60% or more of the real estate acreage held by the Partnership as of
September 22, 1997."
11. Except as amended hereby, the Partnership Agreement shall remain in
full force and effect.
12. Terms not defined herein which are defined in the Partnership
Agreement shall have the same meanings herein.
13. This Amendment and the rights and obligations of the Partners
hereunder shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
therein, without application of the principles of conflicts of laws of such
state.
E-3
<PAGE> 4
IN WITNESS WHEREOF, this Amendment has been executed by the parties set
forth below as of the date first above written.
GENERAL PARTNER SOUTHEAST ACQUISITIONS, INC.
By /s/ Arthur W. Mullin
--------------------------
Name:
Title:
SUCCESSOR GENERAL PARTNER SOUTHERN MANAGEMENT GROUP, LLC.
By /s/ Richard W. Sorenson
--------------------------
Name:
Title:
LIMITED PARTNERS LIMITED PARTNERS
By /s/ Arthur W. Mullin
--------------------------
Name:
Title:
E-4
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<ARTICLE> 5
<CIK> 0000829905
<NAME> SOUTHEAST ACQUISITIONS II, L.P.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 344,476
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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0
0
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<OTHER-SE> 2,466,918
<TOTAL-LIABILITY-AND-EQUITY> 2,632,282
<SALES> 1,332,313
<TOTAL-REVENUES> 1,349,188
<CGS> 0
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<OTHER-EXPENSES> 0
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