<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______ to _______
Commission file number 0-18382
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
North Carolina 56-1623861
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
INTERSTATE TOWER
SUITE 1500
P. O. BOX 1012
CHARLOTTE, NORTH CAROLINA 28201-1012
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(704)379-9164
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Registrant's telephone number, including area code:
NOT APPLICABLE
----------------------------------------------------
(Former Name, former address and former fiscal year,
if changed since last report)
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 twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
foregoing filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
508,844 Beneficial Unit Certificates outstanding as of November 8, 1996.
Page 1 of 11 sequentially numbered pages
<PAGE> 2
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Balance Sheets
<TABLE>
<CAPTION>
September 30,
1996 December 31,
(unaudited) 1995
----------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 473,410 $ 483,885
Restricted cash and cash equivalents 262,539 134,232
Receivables, net of allowance 11,352 296,517
Rental property:
Land 4,759,041 4,759,041
Buildings and Improvements 19,547,106 19,212,524
----------- -----------
24,306,147 23,971,565
Less accumulated depreciation (4,462,298) (3,964,123)
----------- -----------
19,843,849 20,007,442
Deferred loan costs, net of accumulated
amortization of $75,142 and $169,510 at
September 30, 1996 and December 31, 1995, respectively 26,348 47,923
Other Assets 30,684 0
----------- -----------
$20,648,182 $20,969,999
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
Long-term debt $14,351,879 $14,649,738
Accounts payable and accrued expenses 398,922 161,064
Due to general partners and affiliates 419,113 446,114
Tenants' security deposits 57,883 60,754
----------- -----------
15,227,797 15,317,670
Partners' equity (deficit):
General partners 4,986 5,344
Limited partners beneficial unit
certificates, authorized 1,000,000
units, issued and outstanding 508,594
and 508,594 units at September 30, 1996
and December 31, 1995, respectively 5,415,399 5,646,985
----------- -----------
5,420,385 5,652,329
----------- -----------
$20,648,182 $20,969,999
=========== ===========
</TABLE>
See the attached notes to the consolidated financial statements
2
<PAGE> 3
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Statements of Operations (unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Rental Income $713,286 $695,472 $2,142,667 $2,266,862
Interest and other income 8,022 10,879 30,045 28,924
-------- -------- ---------- ----------
721,308 706,351 2,172,712 2,295,786
Expenses:
Interest expense 325,135 333,785 980,313 1,017,091
Depreciation and amortization 183,032 162,953 538,940 506,947
Other operating expenses 228,226 189,238 689,307 597,772
-------- -------- ---------- ----------
736,393 685,976 2,208,560 2,121,810
-------- -------- ---------- ----------
NET INCOME (LOSS) $(15,085) $ 20,375 $ (35,848) $ 173,976
======== ======== ========== ==========
Net income (loss) per Beneficial
Unit Certificate $ (0.03) $ 0.04 $ (0.07) $ 0.34
======== ======== ========== ==========
Beneficial Unit Certificates
Outstanding--weighted average 508,594 508,594 508,594 508,594
======== ======== ========== ==========
</TABLE>
See the attached notes to the consolidated financial statements
3
<PAGE> 4
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit) (unaudited)
For the Nine Months Ended September 30, 1995 and 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Partners' equity (deficit) at December 31, 1994 $(9,968) $5,585,042 $5,575,074
Net income for the Nine Months ended September 30, 1995 1,740 172,236 173,976
Distributions to partners 0 (165,373) (165,373)
------- ---------- ----------
Partners' equity (deficit) at September 30, 1995 $(8,228) $5,591,905 $5,583,677
======= ========== ==========
Partners' equity (deficit) at December 31, 1995 $ 5,344 $5,646,985 $5,652,329
Net income for the Nine Months ended September 30, 1996 (358) (35,490) (35,848)
Distributions to partners 0 (196,096) (196,096)
------- ---------- ----------
Partners' equity (deficit) at September 30, 1996 $ 4,986 $5,415,399 $5,420,385
======= ========== ==========
</TABLE>
See the attched notes to the consolidated financial statements
4
<PAGE> 5
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (35,848) $ 173,976
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and Amortization 538,940 506,948
Decrease in rents receivable, net 285,165 150,677
Decrease in amounts due to
General Partners and Affiliates (27,001) (27,001)
Increase in accounts payable and
accrued expenses 237,858 150,989
Increase (Decrease) in tenant's
security deposits (2,871) (2,794)
Increase in restricted cash and
cash equivalents (128,307) (169,780)
Other (30,684) (7,283)
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 837,252 775,732
INVESTING ACTIVITIES
Additions to rental properties (353,773) (82,355)
--------- ---------
NET CASH USED BY INVESTING
ACTIVITIES (353,773) (82,355)
FINANCING ACTIVITIES
Increase in deferred loan costs, net 0 (1,623)
Mortgage principal reduction (297,859) (272,361)
Distributions to Limited Partners (196,096) (165,373)
--------- ---------
NET CASH USED BY FINANCING
ACTIVITIES (493,955) (439,357)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (10,476) 254,020
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 483,885 303,738
--------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 473,409 $ 557,758
========= =========
</TABLE>
See the attached notes to the consolidated financial statements
5
<PAGE> 6
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1996, are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-K for the year ended December 31, 1995.
2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Atlantic Income Properties Limited Partnership (the Partnership) was formed on
March 30, 1988, for the purpose of developing, leasing and investing in
commercial real estate properties located primarily in the southeastern United
States. ISC Realty Corporation and Chadsford Associates II are the general
partners and Atlantic Income, Inc., is the initial limited partner. The
Partnership will be terminated upon the occurrence of certain events as defined
in the Partnership's limited partnership agreement but, in any event, on
December 31, 2028.
A public offering of Beneficial Unit Certificates (BUC's) became effective on
June 16, 1988, and terminated on February 7, 1990. Public investors subscribed
for $10,174,012 of the BUC's. The initial admission of investors to the
Partnership occurred on August 1, 1988. Investors were admitted to the
Partnership monthly on the first day of the month their subscription funds were
received.
The Partnership incurred costs in connection with the offering, registration
and sale of the BUC's of $1,294,817. These costs have been charged against
partners' capital as a reduction of the proceeds from the sale of the BUC's.
The Partnership completed the acquisition of the final property in September,
1989, and currently owns five properties consisting of: Southwest Plaza,
Roanoke, Virginia; Lincoln Center, Lincolnton, North Carolina; Sangaree Plaza,
Berkeley County, South Carolina; Rosewood Shopping Center, Columbia, South
Carolina; and West Ridge Plaza, Bristol, Tennessee.
All profits, gains and losses of the Partnership are allocated among the
general and limited partners in accordance with the Partnership agreement.
6
<PAGE> 7
3. RELATED PARTY TRANSACTIONS
The Partnership incurs certain costs and expenses related to services provided
by its general partners and their affiliates. These costs and expenses are as
follows for the nine months ended September 30, 1996, and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Property/asset management fees $134,484 $136,436
Leasing commissions $ 54,234 $ 22,659
</TABLE>
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
ITEM 2.-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES.
The Registrant paid a distribution on October 15, 1996 for the quarter ended
September 30, 1996, at an annualized rate of 2.5%. The total distribution was
$63,606. Management anticipates that quarterly distributions will be
maintained at this level.
At September 30, 1996, the Registrant held $473,410 as operating cash. These
funds will continue to be distributed to the limited partners at the rate
discussed above and will also be maintained for any necessary capital
expenditures.
Restricted cash increased from $134,232 at December 31, 1995, to $262,539 at
September 30, 1996, due to funds escrowed for property taxes. Likewise,
accounts payable and accrued expenses increased over the same period due
largely to the property tax accrual. Receivables, net of allowance, decreased
from $296,517 to $11,352 in the nine month period ended September 30, 1996, due
primarily to the collection of tenant pass-through charges in the first quarter
of 1996.
As of September 30, 1996, construction at Southwest Plaza was underway in
conjunction with the expansion and upfit of Revco and Member One. It is
estimated that this construction will be completed by April 1997, at a total
cost of approximately $650,000. As of September 30, 1996, approximately
$130,000 of this cost had been incurred. Management believes that the cost of
this construction will be covered entirely from existing cash balances and
operating cash flow from the properties. Management does not anticipate the
need to borrow funds for this construction, nor does management believe the
dividend will be reduced or suspended.
7
<PAGE> 8
RESULTS OF OPERATIONS.
NINE MONTHS ENDED SEPTEMBER 30, 1996, AS COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
The Partnership reported a net loss for the nine months ended September 30,
1996, of $35,848 as compared to net income in the same period of 1995 of
$173,976. The decrease is due to the following:
Rental income decreased from $2,266,862 for the nine months ended September 30,
1995, to $2,142,667 for the nine months ended September 30, 1996, as a result
of expense reimbursements received in the first quarter of 1995 but not 1996,
as well as lower percentage rent at Westridge in 1996.
Interest and other income increased from $28,924 to $30,045 for the nine months
ended September 30, 1995, and September 30, 1996, respectively, as a result of
greater cash reserves earning income in 1996.
Other operating expenses increased from $597,772 for the nine months ended
September 30, 1995, to $689,307 for the nine months ended September 30, 1996.
The increase results primarily from an increase in common area maintenance
expense and an increase in building repairs expense. Paving repairs and
landscaping at Westridge and Lincoln contributed to the increase as well as
snow removal costs at Westridge and Southwest. In addition, lease commissions
increased in conjunction with the Revco expansion at Southwest.
THREE MONTHS ENDED SEPTEMBER 30, 1996, AS COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
The Partnership reported a net loss of $15,085 for the three months ended
September 30, 1996, as compared to net income of $20,375 for the same period in
1995.
Rental income increased $17,814 for the three month's period ended
September 30, 1996, as compared to the same period in 1995 due to continued
high occupancy and normal rent escalations at the properties.
Operating expenses increased from $189,238 for the three months ended
September 30, 1995, to $228,226 for the same period in 1996. The increase
results primarily from an increase in lease commission expense as explained
above.
8
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for vote during the quarter covered by
this report.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the nine months ended
September 30, 1996.
9
<PAGE> 10
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIC INCOME PROPERTIES
LIMITED PARTNERSHIP
By: ISC Realty Corporation,
General Partner and
Principal Financial Officer
of the Registrant
Date: Novenber 14, 1996 By: /s/ J. Christopher Boone
--------------------------------
J. Christopher Boone,
President
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ATLANTIC INCOME PROPERTIES FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 473,410
<SECURITIES> 0
<RECEIVABLES> 11,352
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 747,301
<PP&E> 24,306,147
<DEPRECIATION> (4,462,298)
<TOTAL-ASSETS> 20,648,182
<CURRENT-LIABILITIES> 398,922
<BONDS> 14,351,879
0
0
<COMMON> 0
<OTHER-SE> 5,420,385
<TOTAL-LIABILITY-AND-EQUITY> 20,648,182
<SALES> 0
<TOTAL-REVENUES> 2,172,712
<CGS> 0
<TOTAL-COSTS> 689,307
<OTHER-EXPENSES> 538,940
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 980,313
<INCOME-PRETAX> (35,848)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,848)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,848)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
