<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 MARCH 31, 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.)
INTERSTATE TOWER
SUITE 1500
P. O. BOX 1012
CHARLOTTE, NORTH CAROLINA 28201-1012
(Address of 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 April 30, 1998.
Page 1 of 9 sequentially numbered pages
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ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(unaudited) 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 264,380 $ 283,889
Restricted cash and cash equivalents 158,509 122,066
Receivables, net of allowance 276,087 277,789
Rental property:
Land 4,237,041 4,237,041
Buildings and Improvements 18,780,836 18,780,836
------------ ------------
23,017,877 23,017,877
Less accumulated depreciation (3,975,388) (3,975,388)
------------ ------------
19,042,489 19,042,489
Deferred loan costs, net of accumulated
amortization of $89,206 and $206,849 at March 31,
1998 and December 31, 1997, respectively 8,665 3,665
------------ ------------
$ 19,750,130 $ 19,729,898
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Long-term debt $ 13,718,062 $ 13,829,851
Line-of-credit 0 75,000
Accounts payable and accrued expenses 430,420 362,820
Due to general partners and affiliates 572,878 572,878
Tenants' security deposits 55,888 58,387
------------ ------------
14,777,248 14,898,936
Partners' equity (deficit):
General partners 5,227 3,179
Limited Partners beneficial unit certificates,
authorized 1,000,000 units, issued and outstanding
508,594 and 508,594 units at March 31, 1998, and
December 31, 1997, respectively 4,967,655 4,827,783
------------ ------------
4,972,882 4,830,962
------------ ------------
$ 19,750,130 $ 19,729,898
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 3
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
------------ ------------
<S> <C> <C>
Revenue:
Rental Income $807,329 $741,127
Interest and other income 9,128 5,438
-------- --------
816,457 746,565
Expenses:
Interest 334,231 319,358
Depreciation and amortization 0 7,033
Other operating expenses 277,403 229,243
-------- --------
611,634 555,634
-------- --------
NET INCOME 204,823 190,931
======== ========
Net income per Beneficial Unit Certificate $ 0.40 $ 0.38
======== ========
Beneficial Unit Certificates
Outstanding--weighted average 508,594 508,594
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
<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 loss for the three months ended
March 31, 1997 $ 9,547 $ 181,384 $ 190,931
Distributions to partners 0 (66,106) (66,106)
------- ----------- -----------
PARTNERS' EQUITY AT MARCH 31, 1997 $ 9,547 $ 115,278 $ 124,825
======= =========== ===========
Partners' equity at December 31, 1997 $ 3,179 $ 4,827,783 $ 4,830,962
Net income for the three months ended
March 31, 1998 $ 2,048 $ 202,775 $ 204,823
Distributions to partners 0 (62,903) (62,903)
------- ----------- -----------
PARTNERS' EQUITY AT MARCH 31, 1998 $ 5,227 $ 4,967,655 $ 4,972,882
======= =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 204,823 $ 190,931
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 0 7,033
Decrease in rents receivable, net 1,702 66,963
Decrease in amounts due to General Partners and Affiliates 0 (9,001)
Increase in accounts payable and accrued expenses 67,599 55,423
Increase (Decrease) in tenant's security deposits (2,499) 3,156
Increase in other assets 0 (48,269)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 271,625 266,236
--------- ---------
INVESTING ACTIVITIES
Increase in building improvements 0 (242,999)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES 0 (242,999)
--------- ---------
FINANCING ACTIVITIES
Increase in deferred building and loan costs (5,000) (41,923)
Mortgage principal reduction (111,788) (106,818)
Line-of-credit (75,000) 0
Distributions to Limited Partners (62,903) (66,106)
Increase in restricted cash and cash equivalents (36,443) (42,479)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (291,134) (257,326)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (19,509) (234,089)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 283,889 266,603
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 264,380 $ 32,514
========= =========
</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)
MARCH 31, 1998
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 three-month period ended March 31, 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.
ORGANIZATION
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.
RENTAL PROPERTY
The Partnership completed the acquisition of the final property in September
1989 and currently owns two properties consisting of: Rosewood Shopping Center,
Columbia, South Carolina; and West Ridge Plaza, Bristol, Tennessee. 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 24,
1998, the Registrant entered into a Purchase and Sale Agreement for the
disposition of Rosewood. The purchaser has a limited time period in which to
conduct its due diligence investigation of the property. It is uncertain at this
point whether or not they will complete the purchase of the property.
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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 does not intend to make additional distributions until the
disposition of the remaining properties. It is anticipated that both of the
remaining properties will be disposed of in 1998.
As of March 31, 1998, the Registrant had cash and cash equivalents of $264,380.
The Registrant also held restricted cash and cash equivalents of $158,509 which
includes property tax escrows and tenant security deposits at March 31, 1998.
The Registrant is holding these cash reserves for operations and other necessary
capital improvements.
RESULTS OF OPERATIONS.
The Partnership recorded net income for the three months ended March 31, 1998,
of $204,823 as compared to net income of $190,931 in 1997. The change is due to
the following factors:
Rental income increased approximately $66,200 for the three months ended March
31, 1998, as compared to the three months ended March 31, 1997. This increase
was primarily due to scheduled rent increases as well as continued high
occupancy levels at the properties.
Operating expenses for the three months ended March 31, 1998, increased 21% to
$277,403. The increase was largely a result of a $50,000 lease commission paid
in connection with the sale of the Partnership's assets as previously discussed.
Interest expense increased from $319,358 for the three months March 31, 1997, to
$334,231 for the three months ended March 31, 1998, due to higher interest rates
on the Lincoln and Southwest mortgages.
7
<PAGE> 8
ATLANTIC INCOME PROPERTIES LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Registrant has commenced an action seeking declaratory judgement
for breach of contract against SunWest Properties, Inc. and Republic Title of
Texas, Inc. The Registrant and SunWest were parties to a Real Estate Purchase
Agreement dated July 11, 1997. The Registrant contends that SunWest breached
this agreement and is seeking damages therefrom. The lawsuit is in the
discovery stage.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
The Registrant has entered into negotiations to extend the maturity of
the mortgage loan on West Ridge Plaza. The loan originally matured on January 1,
1995, and was extended under three one year forbearance agreements to January 1,
1998. At the time of this report, substantial discussions have occurred but no
resolution has been finalized.
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 required to be filed during the
three months ended March 31, 1998.
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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
(REGISTRANT)
BY: /s/ J. CHRISTOPHER BOONE
-----------------------------------------
J. CHRISTOPHER BOONE
ISC REALTY CORPORATION,
GENERAL PARTNER AND PRINCIPAL EXECUTIVE
OFFICER, PRINCIPAL FINANCIAL OFFICER OF
THE REGISTRANT
DATE: MAY 11, 1998
-----------------------
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ATLANTIC INCOME PROPERTIES FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 264,380
<SECURITIES> 0
<RECEIVABLES> 276,087
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 698,976
<PP&E> 23,017,877
<DEPRECIATION> (3,975,388)
<TOTAL-ASSETS> 19,750,130
<CURRENT-LIABILITIES> 486,708
<BONDS> 13,718,062
0
0
<COMMON> 0
<OTHER-SE> 4,972,882
<TOTAL-LIABILITY-AND-EQUITY> 19,750,130
<SALES> 0
<TOTAL-REVENUES> 816,457
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 277,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 334,231
<INCOME-PRETAX> 204,823
<INCOME-TAX> 0
<INCOME-CONTINUING> 204,823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204,823
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
