<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, 1997
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
--------------
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.
508,594 Beneficial Unit Certificates outstanding as of November 8, 1997.
Page 1 of 11 sequentially numbered pages
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ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(unaudited) 1996
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 116,038 $ 266,603
Restricted cash and cash equivalents 288,047 94,699
Receivables, net of allowance 180,784 309,164
Rental property:
Land 4,567,041 4,567,041
Buildings and Improvements 19,653,673 19,262,045
------------ ------------
24,220,714 23,829,086
Less accumulated depreciation (3,944,932) (3,944,932)
------------ ------------
20,275,782 19,884,154
Deferred loan costs, net of accumulated
amortization of $95,591 and $206,849 at
September 30, 1997 and December 31, 1996, respectively 56,746 19,317
Other Assets 31,096 0
------------ ------------
$ 20,948,493 $ 20,573,937
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
Long-term debt $ 13,937,863 $ 14,250,705
Short-term borrowings 73,224 0
Accounts payable and accrued expenses 429,794 247,436
Due to general partners and affiliates 479,635 493,576
Tenants' security deposits 57,519 55,085
------------ ------------
14,978,035 15,046,802
Partners' equity (deficit):
General partners 18,436 12,069
Limited Partners beneficial unit certificates,
authorized 1,000,000 units, issued and outstanding
508,844 and 508,844 units at September 30, 1997, and
December 31, 1996, respectively 5,952,022 5,515,066
------------ ------------
5,970,458 5,527,135
------------ ------------
$ 20,948,493 $ 20,573,937
============ ============
</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,
1997 1996 1997 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue:
Rental Income $ 752,949 $ 713,286 $ 2,252,236 $ 2,142,667
Interest and other income 5,254 8,022 15,455 30,045
----------- ----------- ----------- -----------
758,203 721,308 2,267,691 2,172,712
Expenses:
Interest expense 340,982 325,135 1,001,308 980,313
Depreciation and amortization 2,241 183,032 13,417 538,940
Other operating expenses 190,080 228,226 616,315 689,307
----------- ----------- ----------- -----------
533,303 736,393 1,631,040 2,208,560
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 224,900 $ (15,085) $ 636,651 $ (35,848)
=========== =========== =========== ===========
Net income (loss) per Beneficial
Unit Certificate $ 0.44 $ (0.03) $ 1.24 $ (0.07)
=========== =========== =========== ===========
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 (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Partners' equity 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 at September 30, 1996 $ 4,986 $ 5,415,399 $ 5,420,385
=========== =========== ===========
Partners' equity at December 31, 1996 $ 12,069 $ 5,515,066 $ 5,527,135
Net income for the Nine Months ended September 30, 1997 6,367 630,284 636,651
Distributions to partners 0 (193,328) (193,328)
----------- ----------- -----------
Partners' equity at September 30, 1997 $ 18,436 $ 5,952,022 $ 5,970,458
=========== =========== ===========
</TABLE>
See the attached 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,
1997 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 636,651 ($ 35,848)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and Amoritization 13,417 538,940
Decrease in rents receivable, net 128,380 285,165
Decrease in amounts due to General Partners and Affiliates (13,941) (27,001)
Increase in accounts payable and accrued expenses 179,924 234,987
Increase in restricted cash and cash equivalents (193,348) (128,307)
Other (39,645) (30,684)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 711,438 837,252
INVESTING ACTIVITIES
Additions to rental properties (391,628) (353,773)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (391,628) (353,773)
FINANCING ACTIVITIES
Increase in deferred loan costs, net (37,429) (1,623)
Mortgage principal reduction (239,618) (272,361)
Distributions to Limited Partners (193,328) (165,373)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (470,375) (439,357)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (150,565) 44,122
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 266,603 303,738
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 116,038 $ 347,860
========= =========
</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, 1997
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, 1997, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. 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, 1996.
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.
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All profits, gains and losses of the Partnership are allocated among the general
and limited partners in accordance with the Partnership agreement.
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, 1997, and 1996:
1997 1996
---- ----
Property/asset management fees $134,295 $134,484
Leasing commissions $ 13,151 $ 54,234
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, 1997 for the quarter ended
September 30, 1997, 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, 1997, the Registrant held $116,038 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.
The Partnership has been unsuccessful in refinancing the mortgage note payable
secured by West Ridge Plaza, originally maturing in December 1995 and extended
to December 1996. However, the Partnership has received verbal confirmation from
the lender that loan payments will be accepted through December 31, 1997. The
Partnership continues to make normal monthly payments of principal and interest
on this loan.
The mortgage notes payable secured by Southwest Plaza and Lincoln Center matured
in April 1997 and were extended to December 15, 1997. As part of the extension,
the interest rates on the notes were increased from 8.4% to 10.0%.
In light of the expiration of extension agreements for loans secured by West
Ridge Plaza, Southwest Plaza and Lincoln Center, the general partners will seek
to either payoff or extend the maturity date of the loans upon expiration. The
payoff cannot occur without either selling the properties or securing additional
debt financing, which the general partners believe is currently available, in
amounts and upon terms acceptable to the Partnership.
7
<PAGE> 8
On April 9, 1997, the Registrant entered into a short-term borrowing agreement
with a large regional bank under which the bank agreed to extend a $250,000 line
of credit to the Registrant. This line of credit is payable on demand and
matures on December 31, 1997. As of September 30, 1997, the Registrant had drawn
$73,224 under this line. Management intends to extend the maturity of this note
upon its expiration.
RESULTS OF OPERATIONS.
NINE MONTHS ENDED SEPTEMBER 30, 1997, AS COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
The Partnership reported net income for the nine months ended September 30, 1997
of $636,651 as compared to a net loss in the same period of 1996 of $35,848. The
increase is due to the following:
Rental revenue increased 5% from $2,142,667 for the nine months ended September
30, 1996, to $2,252,236 for the nine months ended September 30, 1997. The
increase was largely attributable to a $60,000 increase in revenue from
Southwest Plaza associated with the completion of the Revco expansion. In
addition, expense reimbursements earned are $48,000 higher due to being based on
increased expenses of the prior year.
Interest and other income decreased from $30,045 for the nine months ended
September 30, 1996, to $15,455 for the same period in 1997. The majority of this
decrease relates to lower interest income earned on cash reserves. The cash
reserve was utilized to expand the Revco space at Southwest Plaza, the benefit
of which is reflected in the increased rental revenue.
The decrease in depreciation and amortization expense accounted for the majority
of the change in the net income(loss) between the periods. Depreciation and
amortization expense decreased from $538,040 in 1996 to $13,417 for the nine
month period in 1997 in accordance with the accounting policy to discontinue
depreciating assets held for sale.
Other operating expenses decreased from $689,307 for the nine months ended
September 30, 1996 to $616,315 for the same period in 1997. The decrease results
primarily from lower common area maintenance expense and lower lease
commissions. Paving repairs and landscaping at Westridge and Lincoln as well as
snow removal costs at Westridge and Southwest in 1996 inflated the prior period
figure. Lease commissions were higher in 1996 due to the Revco expansion at
Southwest.
Interest expense increased to $1,001,308 for the nine month period in 1997 due
to the increased rate charged by the lender on Lincoln and Southwest as well as
the additional borrowing under the line of credit.
8
<PAGE> 9
THREE MONTHS ENDED SEPTEMBER 30, 1997, AS COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
The Partnership reported net income of $224,900 for the three months ended
September 30, 1997, as compared to a net loss of $15,085 for the same period in
1996.
Rental income increased $39,663 to $752,949 for the three month period ended
September 30, 1997, as compared to the same period in 1996 due to the increase
from the Revco expansion as well as higher occupancy at Westridge.
Depreciation and amortization expense decreased to $2,241 for the three months
ended September 30, 1997 from $183,032 for the same period in 1996 in accordance
with the accounting policy to discontinue depreciating assets held for sale.
Operating expenses decreased $38,000 to $190,080 for the three months ended
September 30, 1997. This change was the result of lower common area maintenance
and building service expenses as well as the change in lease commissions as
explained above.
Interest expense increased almost $16,000 to $340,982 for the same reasons as
discussed in the section above for the nine month period.
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.
9
<PAGE> 10
ITEM 5 - OTHER INFORMATION
On July 11, 1997, the General Partners entered into a Real Estate
Purchase Agreement to sell the five Partnership properties for a price of
$22,000,000. The sale price would be paid in a combination of cash and the
assumption of debt. Under the Purchase Agreement, the buyer had to close by
September 24, 1997. The Buyer notified the Partnership that they did not intend
to close the sale, however, management believes that they were beyond the time
allowed to cancel their contract. Legal remedies are being considered and will
be undertaken as necessary to protect the Partnership.
Several other buyers have expressed interest in acquiring the
Partnership's assets. One buyer has submitted a letter of intent at a price of
$22 million, subject to various terms and conditions. At this time, the
partnership's legal counsel has discussed the drafting of a Purchase and Sale
Agreement with the buyer's legal counsel. If an acceptable agreement can be
reached and the sale completed, the purchase price would be sufficient to pay
for all costs of the sale, retire the outstanding indebtedness of the
partnership and make a substantial distribution to the BUC holders. However, the
timing of the proposed purchase of the assets may require an extension of the
various note agreements currently in place. Management believes that it can
obtain short-term extensions on terms acceptable to the partnership, if
necessary.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EX-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, 1997.
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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: November 10, 1997 By: /s/ J. CHRISTOPHER BOONE
------------------ ---------------------------
J. Christopher Boone,
President
11
<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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 116,038
<SECURITIES> 0
<RECEIVABLES> 180,784
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 584,869
<PP&E> 24,220,714
<DEPRECIATION> (3,944,932)
<TOTAL-ASSETS> 20,948,493
<CURRENT-LIABILITIES> 503,018
<BONDS> 13,937,863
0
0
<COMMON> 0
<OTHER-SE> 5,970,458
<TOTAL-LIABILITY-AND-EQUITY> 20,948,493
<SALES> 0
<TOTAL-REVENUES> 2,267,691
<CGS> 0
<TOTAL-COSTS> 616,315
<OTHER-EXPENSES> 13,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,001,308
<INCOME-PRETAX> 636,651
<INCOME-TAX> 0
<INCOME-CONTINUING> 636,651
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 636,651
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
