<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 JUNE 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
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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.
508,594 Beneficial Unit Certificates outstanding as of July 31, 1997.
Page 1 of 10 sequentially numbered pages
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ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Balance Sheets
<TABLE>
<CAPTION>
June 30,
1997 December 31,
(unaudited) 1996
----------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 157,891 $ 266,603
Restricted cash and cash equivalents 203,274 94,699
Receivables, net of allowance 198,670 309,164
Rental property:
Land 4,567,041 4,567,041
Buildings and Improvements 19,610,159 19,262,045
------------ ------------
24,177,200 23,829,086
Less accumulated depreciation (4,301,703) (3,944,932)
------------ ------------
19,875,497 19,884,154
Deferred loan costs, net of accumulated
amortization of $93,350 and $206,849 at June 30,
1997, and December 31, 1996, respectively 58,987 19,317
Other 40,540 0
------------ ------------
$ 20,534,859 $ 20,573,937
============ ============
LIABILITIES AND PARTNERS' EQUITY
Long-term debt $ 14,041,559 $ 14,250,705
Short-term borrowings 150,000 0
Accounts payable and accrued expenses 353,417 247,436
Due to general partners and affiliates 481,105 493,576
Tenants' security deposits 56,374 55,085
------------ ------------
15,082,455 15,046,802
Partners' equity:
General partners 14,818 12,069
Limited Partners beneficial unit certificates,
authorized 1,000,000 units, issued and outstanding
508,594 and 508,594 units at June 30, 1997, and
December 31, 1996, respectively 5,437,586 5,515,066
------------ ------------
5,452,404 5,527,135
------------ ------------
$ 20,534,859 $ 20,573,937
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
2
<PAGE> 3
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Statements of Operations (unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue:
Rental Income $758,160 $ 689,017 $1,499,287 $ 1,429,381
Interest and other income 4,763 12,971 10,201 22,023
-------- ----------- ---------- -----------
762,923 701,988 1,509,488 1,451,404
Expenses:
Interest 340,968 327,087 660,326 655,178
Depreciation and amortization 182,960 178,185 367,946 355,908
Other operating expenses 196,992 228,736 426,235 461,081
-------- ----------- ---------- -----------
720,920 734,008 1,454,507 1,472,167
-------- ----------- ---------- -----------
NET INCOME (LOSS) $ 42,003 ($ 32,020) $ 54,981 ($ 20,763)
======== =========== ========== ===========
Net income (loss) per Beneficial
Unit Certificate $ 0.08 ($ 0.06) $ 0.11 ($ 0.04)
======== =========== ========== ===========
Beneficial Unit Certificates
Outstanding--weighted average 508,594 508,594 508,594 508,594
======== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE> 4
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Statements of Partners' Equity (unaudited)
For the Six Months Ended June 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 six months ended
June 30, 1996 (208) (20,555) ($ 20,763)
Distributions to partners 0 (132,491) ($ 132,491)
-------- ----------- -----------
PARTNERS' EQUITY AT
JUNE 30, 1996 $ 5,136 $ 5,493,939 $ 5,499,075
======== =========== ===========
Partners' equity at December 31, 1996 $ 12,069 $ 5,515,066 $ 5,527,135
Net income for the six months ended
June 30, 1997 2,749 52,232 $ 54,981
Distributions to partners 0 (129,712) (129,712)
-------- ----------- -----------
PARTNERS' EQUITY AT
JUNE 30, 1997 $ 14,818 $ 5,437,586 $ 5,452,404
======== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Statements of Cash Flows (unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 54,981 ($ 20,763)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 367,946 355,908
Decrease in rents receivable, net 110,494 252,194
Decrease in amounts due to General Partners and Affiliates (12,471) (18,000)
Increase (Decrease) in accounts payable and accrued expenses 105,981 147,809
Increase in restricted cash and cash equivalents (107,286) (80,359)
Increase in other assets (40,540) (21,240)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 479,105 615,549
--------- ---------
INVESTING ACTIVITIES
Improvements to rental properties (348,114) (214,052)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (348,114) (214,052)
--------- ---------
FINANCING ACTIVITIES
Increase in deferred building and loan costs (50,845) 0
Mortgage principal reduction (209,146) (197,257)
Proceeds from short-term borrowings 150,000 0
Distributions to limited partners (129,712) (132,491)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (239,703) (329,748)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (108,712) 71,749
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 266,603 483,885
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 157,891 $ 555,634
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 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 six-month period ended June 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.
All profits, gains and losses of the Partnership are allocated among the general
and limited partners in accordance with the Partnership agreement.
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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 six months ended June 30, 1997, and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Property/asset management fees $90,371 $93,231
Leasing commissions $10,654 $30,628
</TABLE>
ITEM 2.-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES.
The Registrant paid a distribution on July 15, 1997, for the quarter ended June
30, 1997, at an annualized rate of 2.5%. The total distribution was $63,605.
Management anticipates that quarterly distributions will be maintained at this
level.
At June 30, 1997, the Registrant held $157,891 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. 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 June 30, 1997, the Registrant had drawn $150,000
under this line, however, at the date of this filing, the balance on the line
was $75,000.
RESULTS OF OPERATIONS.
SIX MONTHS ENDED JUNE 30, 1997, AS COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1996
The Partnership reported net income for the six months ended June 30, 1997, of
$54,981 as compared to a net loss in the same period of 1996 of $20,763. The
decrease is due to the following:
Rental income increased from $1,429,381 for the six months ended June 30, 1996,
to $1,499,287 for the six months ended June 30, 1997, primarily due to expense
reimbursements received in the second quarter of 1997 but not 1996.
Interest and other income decreased from $22,023 to $10,201 for the six months
ended June 30, 1996, and June 30, 1997, respectively, as a result of lower cash
reserves earning income in 1997.
7
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Other operating expenses decreased from $461,081 for the six months ended June
30, 1996, to $426,235 for the six months ended June 30, 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 contributed to the higher common
area maintenance expense in 1996.
THREE MONTHS ENDED JUNE 30, 1997, AS COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1996
The Partnership reported net income of $42,003 for the three months ended June
30, 1997, as compared to a net loss of $32,020 for the same period in 1996.
Rental income increased $69,143 for the three months period ended June 30, 1997,
as compared to the same period in 1996 due to higher expense recoveries
collected in the second quarter of 1997.
Interest expense increased from $327,087 to $340,968 for the three months ended
June 30, 1997, and 1996, respectively. This was due primarily to the additional
borrowings under the line of credit. Operating expenses decreased from $228,736
for the three months ended June 30, 1996, to $196,992 for the same period in
1997. The increase results from an decrease in common area maintenance, building
repairs expense, and leasing commissions as explained above.
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
In April of 1997, the General Partners submitted a matter to a vote of
the security holders. The General Partners asked for limited partner approval
for a sale of the Partnership's entire portfolio for a price that would result
in a cash distribution of no less than $13 per BUC. This matter was approved by
the limited partners.
8
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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 net sale 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 has a due diligence
period from July 11, 1997, until August 25, 1997, and must close by September
24, 1997. There are numerous conditions required under the contract and there is
no guarantee that the sale will be successfully completed.
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 six months ended June
30, 1997.
9
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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: August 13, 1997
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 SIX MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 157,891
<SECURITIES> 0
<RECEIVABLES> 198,670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 559,835
<PP&E> 24,177,200
<DEPRECIATION> (4,301,703)
<TOTAL-ASSETS> 20,534,859
<CURRENT-LIABILITIES> 503,417
<BONDS> 14,041,559
0
0
<COMMON> 0
<OTHER-SE> 5,452,404
<TOTAL-LIABILITY-AND-EQUITY> 20,534,859
<SALES> 0
<TOTAL-REVENUES> 1,509,488
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 794,181
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 660,326
<INCOME-PRETAX> 54,981
<INCOME-TAX> 0
<INCOME-CONTINUING> 54,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,981
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
