<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, 1998
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.)
IJL Financial Center
201 N. Tryon Street
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, 1997.
Page 1 of 10 sequentially numbered pages
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ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
Balance Sheets
<TABLE>
<CAPTION>
September 30,
1998 December 31,
(unaudited) 1997
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 857,752 $ 283,889
Restricted cash and cash equivalents 0 122,066
Receivables, net of allowance 75,043 308,641
Rental property:
Land 0 4,137,041
Buildings and Improvements 0 18,400,368
------------ ------------
0 22,537,409
Less accumulated depreciation 0 (3,944,932)
------------ ------------
0 18,592,477
Other Assets 0 3,665
------------ ------------
$ 932,795 $ 19,310,738
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
Long-term debt $ 0 $ 13,829,851
Short-term borrowings 0 75,000
Accounts payable and accrued expenses 27,379 445,243
Distributions Payable 875,212 0
Due to general partners and affiliates 0 521,036
Tenants' security deposits 0 58,386
------------ ------------
902,591 14,929,516
Partners' equity (deficit):
General partners 42,831 3,179
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 (12,627) 4,378,043
------------ ------------
30,204 4,381,222
------------ ------------
$ 932,795 $ 19,310,738
============ ============
</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,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Rental Income $ 131,307 $ 752,949 $1,196,155 $2,252,236
Interest and other income 3,820 5,254 21,713 15,455
---------- ---------- ---------- ----------
135,126 758,203 1,217,868 2,267,691
Expenses:
Interest expense 33,215 340,982 503,097 1,001,308
Depreciation and amortization 0 2,241 0 13,417
Other operating expenses 66,968 190,080 443,994 616,315
---------- ---------- ---------- ----------
100,183 533,303 947,091 1,631,040
---------- ---------- ---------- ----------
Operating income $ 34,943 $ 224,900 $ 270,777 $ 636,651
Gain from sale of rental properties 608,024 0 3,220,516 0
---------- ---------- ---------- ----------
Net income before extraordinary
gain on debt forgiveness 642,967 224,900 3,491,293 636,651
---------- ---------- ---------- ----------
Extraordinary gain from debt forgiveness 474,044 0 474,044 0
---------- ---------- ---------- ----------
NET INCOME (LOSS) $1,117,011 $ 224,900 $3,965,337 $ 636,651
========== ========== ========== ==========
Net income (loss) per Beneficial
Unit Certificate $ 2.17 $ 0.44 $ 7.72 $ 1.24
========== ========== ========== ==========
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, 1998 and 1997
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- ----------- -----------
<S> <C> <C> <C>
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
======= =========== ===========
Partners' equity at December 31, 1997 $ 3,179 $ 4,378,043 $ 4,381,222
Net income for the Nine Months ended September 30, 1998 39,652 3,925,684 3,965,337
Distributions to partners 0 (8,316,354) (8,316,354)
------- ----------- -----------
Partners' equity at September 30, 1998 $42,831 ($ 12,627) $ 30,205
======= =========== ===========
</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,
1998 1997
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 3,965,337 $ 636,651
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of rental property (3,220,516) 0
Depreciation and Amortization 0 13,417
Decrease in rents receivable, net 233,598 128,380
Decrease in amounts due to General Partners and Affiliates (521,036) (13,941)
(Decrease) Increase in accounts payable and accrued expenses (417,863) 179,924
(Decrease) Increase in tenant security deposits payable (58,386) 0
Decrease (Increase) in restricted cash and cash equivalents 122,066 (193,348)
Decrease (Increase) in other assets 0 (39,645)
------------ ---------
NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES 103,200 711,438
INVESTING ACTIVITIES
Improvements to rental properties 0 (391,628)
Cash proceeds from sale of rental properties 17,621,128 0
------------ ---------
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES 17,621,128 (391,628)
FINANCING ACTIVITIES
Decrease (Increase) in deferred loan costs, net 3,665 (37,429)
Mortgage principal reduction (9,637,988) (239,618)
Proceeds from (payments to) short-term borrowings (75,000) 0
Increase in distributions payable 875,212 0
Distributions to Limited Partners (8,316,354) (193,328)
------------ ---------
NET CASH USED BY FINANCING ACTIVITIES (17,150,465) (470,375)
------------ ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 573,863 (150,565)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 283,889 266,603
------------ ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 857,752 $ 116,038
============ =========
Supplementary information to Cash Flow Statement:
Non-cash item transaction
Assets transferred to mortgagor in lieu of payment (4,191,863) 0
</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, 1998
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, 1998, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. 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, 1997.
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 previously owned 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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<PAGE> 7
As of September 30, 1998, the Registrant no longer owned any properties and all
assets had been sold, with the exception of West Ridge Plaza which was
foreclosed on. Three properties owned by the Partnership, Southwest Plaza,
Lincoln Center, and Sangaree Plaza, were sold to Edens & Avant Properties
Limited Partnership on April 1, 1998. For additional information, please refer
to the Registrant's Form 10-K for the year ended December 31, 1997 filed on
April 15, 1998. On April 19, 1998, the Registrant entered into a Purchase and
Sale Agreement for the disposition of Rosewood. The property closed on July 16,
1998, at a price of $1,800,000. Proceeds from the sale total approximately
$315,000. West Ridge Plaza was foreclosed on by the lender on July 28, 1998. The
Registrant chose not to contest the foreclosure because the fair market value of
the property was below the mortgage balance. Previous attempts to sell the
property resulted in no buyers willing to purchase the property for an amount in
excess of the mortgage balance.
Having disposed of all properties in its portfolio, the Partnership was
liquidated on September 30, 1998. At the time of the filing of this report, all
cash on hand has been distributed to the Partners.
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, 1998, and 1997:
1998 1997
---- ----
Property/asset management fees $ 18,384 $134,295
Leasing and selling commissions $ 66,455 $ 13,151
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 April 15, 1998 of $14.50 per BUC
representing the proceeds from the sale of the assets as previously discussed.
The Registrant made the final distribution of $1.72 per BUC on November 26,
1998. The Partnership has distributed all cash on hand and will be terminated
after the final audit is completed.
As of September 30, 1998, the Registrant had $857,752 in cash and cash
equivalents. Cash of approximately $41,332 will be retained to pay for the final
audit and other outstanding payables for the fiscal year.
7
<PAGE> 8
Results of Operations.
The Partnership reported net income for the nine months ended September 30, 1998
of $3,965,337 as compared to a net income in the same period of 1997 of
$636,651. The increase is due to the following:
Rental revenue was $1,196,155 for the nine months ended September 30, 1998,
compared to $2,252,236 for the nine months ended September 30, 1997. The
decrease is attributable to the disposition, in July, of the remaining two
properties.
Interest and other income increased from $15,455 for the nine months ended
September 30, 1997, to $21,713 for the same period in 1998. The increase
reflects interest earned on higher cash reserves which cash reserves were held
until the West Ridge foreclosure was finalized.
Depreciation and amortization expense decreased from $13,417 in 1997 to $0 for
the nine month period in 1998 in accordance with the accounting policy to
discontinue depreciating assets held for sale.
Other operating expenses decreased from $616,315 for the nine months ended
September 30, 1997 to $443,994 for the same period in 1998. The decrease results
from the sale and disposition of the properties.
Interest expense increased from $1,001,308 for the nine month period in 1997 to
$503,097 due to the retirement of debt on Rosewood and West Ridge properties.
Gain from the sale of rental properties was $3,220,516 and income from debt
forgiveness from the general partner fees previously accrued but not paid was
$474,044.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
SunWest lawsuit was settled for $40,124 with proceeds to the Partnership
being received on November 16, 1998. This amount was included in the total
proceeds payable to the investors on November 26, 1998.
Item 2 - Changes in Securities
None.
Item 3 - Defaults Upon Senior Securities
None.
8
<PAGE> 9
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
Having disposed of all the properties originally owned, the Registrant
made a final distribution to the limited partners of all remaining cash after
settling all outstanding liabilities. The partnership will be dissolved as of
September 30, 1998.
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
Form 8-K was not filed in conjunction with the disposition of
the remaining two properties owned by the Registrant. The partnership is being
dissolved as of September 30, 1998, and there will be no continuing operations.
All information relating to the disposition of these properties and the
dissolution of the partnership is included herein.
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: December 9, 1998 By: /s/ J. Christopher Boone
---------------- --------------------------
J. Christopher Boone,
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ATLANTIC INCOME PROPERTIES FOR THE 9 MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 857,752
<SECURITIES> 0
<RECEIVABLES> 75,043
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 932,795
<CURRENT-LIABILITIES> 902,591
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,204
<TOTAL-LIABILITY-AND-EQUITY> 932,795
<SALES> 0
<TOTAL-REVENUES> 4,438,384
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 443,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 503,097
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 474,044
<CHANGES> 0
<NET-INCOME> 3,965,337
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
