SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended March 31, 1995 Commission File Number 0-8952
------------------ ------
SB PARTNERS
- -------------------------------------------------------------------------------
New York 13-6294787
- -------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
666 Fifth Avenue N.Y., N.Y. 10103
- --------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 408-2900
------------------------
1290 Avenue of the Americas, New York , N.Y. 10104
- -------------------------------------------------------------------------------
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 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
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 (applicable only to corporate
issuers).
Not Applicable
<PAGE>
SB PARTNERS
INDEX
Part I Financial Information
Balance Sheets
March 31, 1995 and December 31, 1994 1
Statements of Operations
For the three months ended March 31, 1995
and 1994 2
Statements of Cash Flows
For the three months ended March 31, 1995
and 1994 3
Statements of Changes in Partners' Capital
For the years ended December 31, 1994 and 1993
and three months ended March 31, 1995 4
Notes to Financial Statements 5 - 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 11
Part II Other Information 12
<PAGE>1
<TABLE>
SB PARTNERS
(a limited partnership)
BALANCE SHEETS
March 31, 1995 (Not Audited) and
December 31, 1994 (Audited, but not covered by the report of independent accountants)
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Assets:
Investments -
Real Estate, at cost
Land $ 13,697,284 $ 13,697,284
Buildings, furnishings and improvements 148,600,719 148,151,143
Less - accumulated depreciation and valuation allowance (46,696,346) (45,595,714)
------------ ------------
115,601,657 116,252,713
Investment in joint venture 11,034,950 11,133,621
------------ ------------
126,636,607 127,386,334
Other assets-
Cash and cash equivalents 875,025 1,074,985
Accounts receivable, accrued interest and other 6,596,251 6,776,434
------------ ------------
Total assets $134,107,883 $135,237,753
============ ============
Liabilities:
Mortgage notes payable, net of unamortized discount
of $ 218,741 and $310,904 respectively $112,171,839 $112,253,778
Accounts payable and accrued expenses 7,965,813 7,179,185
Tenants security deposits 1,217,894 1,186,880
------------ ------------
Total liabilities 121,355,546 120,619,843
------------ ------------
Partners' Capital:
Units of partnership interest without par value;
Limited partner - 7,753 units 12,769,128 14,634,460
General partner - 1 unit (16,791) (16,550)
------------ ------------
12,752,337 14,617,910
------------ ------------
Total liabilities & partners' capital $134,107,883 $135,237,753
============ ============
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>2
<TABLE>
SB PARTNERS
(a limited partnership)
STATEMENTS OF OPERATIONS (Not Audited)
<CAPTION>
For the Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Revenues:
Rental income $5,667,084 $6,497,442
Interest on mortgage notes receivable 0 247,500
Interest on short-term investments 20,118 15,086
Other 214,580 178,786
----------- -----------
Total revenues 5,901,782 6,938,814
----------- -----------
Expenses
Interest on mortgage notes payable 2,871,374 3,456,387
Real estate operating expenses 2,547,298 3,059,630
Depreciation and amortization 1,194,551 1,328,434
Real estate taxes 496,933 650,578
Management fees 483,717 531,770
Other 127,809 224,315
----------- -----------
Total expenses 7,721,682 9,251,114
----------- -----------
Loss from operations (1,819,900) (2,312,300)
Equity in net loss of joint venture (45,673) (204,787)
----------- -----------
Net loss (1,865,573) (2,517,087)
Loss allocated to general partner (241) (325)
----------- -----------
Loss allocated to limited partners ($1,865,332) ($2,516,762)
=========== ===========
Net Loss Per Unit of Limited Partnership Interest:
Net Loss ($240.59) ($324.62)
=========== ===========
Weighted Average Number of Units of Limited
Partnership Interest Outstanding 7,753 7,753
=========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>3
<TABLE>
SB PARTNERS
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the three months ended March 31, 1995 (Not Audited) and
for the years ended December 31, 1994 and 1993 (Audited, but not covered by the report of independent public accountants)
<CAPTION>
Limited Partners:
Units of
Partnership Cumulative
Interest Cash Accumulated
Number Amount Distributions Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 7,753 $119,968,973 ($97,728,323) $9,128,331 $31,368,981
Net loss for the period - - - (8,976,836) (8,976,836)
----- ------------ ------------ ----------- -----------
Balance, December 31, 1993 7,753 119,968,973 (97,728,323) 151,495 22,392,145
Net loss for the period - - - (7,757,685) (7,757,685)
----- ------------ ------------ ----------- -----------
Balance, December 31, 1994 7,753 119,968,973 (97,728,323) (7,606,190) 14,634,460
Net loss for the period - - - (1,865,332) (1,865,332)
----- ------------ ------------ ----------- -----------
Balance, March 31, 1995 7,753 $119,968,973 ($97,728,323) ($9,471,522) $12,769,128
===== ============ ============ =========== ===========
<CAPTION>
General Partner:
Units of
Partnership Cumulative
Interest Cash Accumulated
Number Amount Distributions Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 1 $10,000 ($24,559) $ 168 ($14,391)
Net loss for the period - - - (1,158) (1,158)
----- ------- -------- ------- --------
Balance, December 31, 1993 1 10,000 (24,559) (990) (15,549)
Net loss for the period - - - (1,001) (1,001)
----- ------- -------- ------- --------
Balance, December 31, 1994 1 10,000 (24,559) (1,991) (16,550)
Net loss for the period - - - (241) (241)
----- ------- -------- ------- --------
Balance, March 31, 1995 1 $10,000 ($24,559) ($2,232) ($16,791)
===== ======= ======== ======= ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>4
<TABLE>
SB PARTNERS
(a limited partnership)
STATEMENTS OF CASH FLOWS (Not Audited)
<CAPTION>
For the Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss ($1,865,573) ($2,517,087)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Equity in net loss of joint venture 45,673 204,787
Depreciation and amortization 1,194,551 1,328,434
Amortization of discount on mortgage notes payable 92,163 80,567
Decrease (increase) in other assets 86,264 (251,870)
Increase in other liabilities 817,642 1,934,321
----------- -----------
Net cash provided by operating activities 370,720 779,152
----------- -----------
Cash Flows From Investing Activities:
Capital additions to real estate (449,576) (680,047)
Payments and distributions received from joint venture 52,998 0
Additional advances under guarantees 0 98,882
----------- -----------
Net cash used in investing activities (396,578) (581,165)
----------- -----------
Cash Flows From Financing Activities:
Principal payments on mortgage notes payable (174,102) (194,334)
----------- -----------
Net cash used in financing activities (174,102) (194,334)
----------- -----------
Net increase (decrease) in cash and cash equivalents (199,960) 3,653
Cash and cash equivalents at beginning of period 1,074,985 423,262
----------- -----------
Cash and cash equivalents at end of period $875,025 $426,915
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $2,001,166 $2,588,973
=========== ===========
The accompanying notes are an intregal part of these statements.
</TABLE>
<PAGE>5
SB PARTNERS
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
-----------------------------------------
(1) Accounting and Financial Reporting
----------------------------------
The financial statements included herein are unaudited;
however, the information reflects all adjustments (consisting solely
of normal recurring adjustments) that are, in the opinion of
management, necessary to a fair presentation of the financial
position, results of operations and cash flows for the interim
periods. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Registrant believes that
the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read
in conjunction with the financial statements and the notes thereto
included in the Registrant's latest annual report on Form 10-K.
Certain prior year amounts have been reclassified to make them
comparable with the current year presentation.
The results of operations for the three month periods ended
March 31, 1995 and 1994 are not necessarily indicative of the results
to be expected for a full year.
(2) Commitments and Contingencies
-----------------------------
The Registrant has secured irrevocable letters of credit of
approximately $1,038,000 which primarily serve as additional
collateral securing certain financing, and utility and tenant security
deposit bonds.
(3) Other Matters
-------------
During 1993, the Partnership stopped making regular monthly
payments of debt service to its lender on the mortgage note secured by
the International Jewelry Center. In the interim, the Partnership has
paid available cash flow from the building to the lender under an
informal agreement. In November 1993, the lender declared the loan in
default and on March 3, 1995, filed a Notice of Default and Election
to Sell. It is presently uncertain whether the Partnership will be
able to successfully continue to hold the property or obtain some
other resolution that would be beneficial to it. (Please refer also
to the Liquidity and Capital Resources section of the Management
Discussion and Analysis.)
<PAGE>6
The Partnership is a party to certain actions directly related to its
normal business operations. While the ultimate outcome is not
presently determinable with certainty, the Partnership believes that
the resolution of these matters will not have a material effect on its
financial position and operations.
<PAGE>7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
General
- -------
The financial statements as of and for the three month period ended
March 31, 1995 reflect the operations of three office properties, one shopping
center, three residential garden apartment properties and two joint ventures.
The financial statements as of and for the three month period ended March 31,
1994 reflect the operations of three office properties, one shopping center,
four residential garden apartment properties and two joint ventures.
Total income for the three months ended March 31, 1995 decreased
$977,000 to approximately $5,902,000 from approximately $6,879,000 for the
three months ended March 31, 1994, and the net loss decreased $651,000 to
approximately $1,866,000 for the three months ended March 31, 1995 compared to
a loss of approximately $2,517,000 for the three months ended March 31, 1994.
Changes in total income and net loss are in part attributable to the
sale of Woodlake Village/Redwood Village and the reacquisition and sale of Nob
Hill Apartments during 1994.
Holiday Park Apartments
- -----------------------
Total revenues for the three months ended March 31, 1995 decreased
$4,000 to $265,000 from $269,000 for the three months ended March 31, 1994.
Net loss after depreciation and mortgage interest expense for the three months
ended March 31, 1995 increased $31,000 to $41,000 from the net loss of $10,000
for the three months ended March 31, 1994.
The increase in net loss is primarily due the decrease in revenues of
$4,000, an increase in repair and maintenance costs of $11,000, and an increase
in payroll and related costs of $7,000.
Meadow Wood Apartments
- ----------------------
Total revenues for the three months ended March 31, 1995 increased
$59,000 to $1,121,000 from $1,062,000 for the three months ended March 31,
1994. Net loss after depreciation and mortgage interest expense for the three
months ended March 31, 1995 increased $1,000 to $6,000 from the net loss of
$5,000 for the three months ended March 31, 1994.
<PAGE>8
The increase in revenues of $59,000 is primarily the result of a
stronger apartment market, as evidenced by increases in rental rates
implemented at the property during the past year. The revenue increase was
offset by increases in operating expenses, primarily increases in repairs and
maintenance of $20,000, and utilities of $14,000.
Sahara Palms Apartments
- -----------------------
Total revenues for the three months ended March 31, 1995 increased
$15,000 to $510,000 from $495,000 for the three months ended March 31, 1994.
Net loss after depreciation and mortgage interest expense for the three months
ended March 31, 1995 increased $16,000 to $46,000 from the net loss of $30,000
for the three months ended March 31, 1994.
The increase in revenues of $15,000 is primarily the result of rental
increases at the property. The rental increases were more than offset by
increased operating expenses, primarily increases in repairs and maintenance of
$15,000, and payroll and related costs of $5,000.
International Jewelry Center
- ----------------------------
Total revenues for the three months ended March 31, 1995 increased
$19,000 to $1,669,000 from $1,650,000 for the three months ended March 31,
1994. Net loss for the three months ended March 31, 1995 decreased $18,000 to
$792,000 from the net loss of $810,000 for the three months ended March 31,
1994.
The increase in total revenues was primarily due to an increase in the
property occupancy rate from 67% in the first quarter of 1994 as compared with
70% in the first quarter of 1995. The net loss decreased $18,000 as a result
of keeping overall expenses at their 1994 levels while experiencing increased
occupancy at the property.
Plantation Shopping Center
- --------------------------
Total revenues for the three months ended March 31, 1995 increased
$83,000 to $397,000 from $314,000 for the three months ended March 31, 1994.
Net loss for the for three months ended March 31, 1995 decreased $246,000 to
$94,000 from the net loss of $340,000 for the three months ended March 31,
1994.
<PAGE>9
The increase in revenues is primarily due to increases in rental rates
negotiated on new and renewal leases at the property, increasing revenues
$50,000, to increased occupancy at the property which increased income $13,000,
and to increased escalation income of $20,000. In addition to the increase in
total revenues, legal fees totalling $85,000 which were incurred in connection
with a tenant collection matter in 1994 and contributed to the net loss in that
year, were not incurred in 1995. The decrease in net loss is also attributable
to a decrease in losses due to uncollectible accounts of $60,000.
1010 Market Street
- ------------------
Total revenues for the three months ended March 31, 1995 increased
$58,000 to $1,496,000 from $1,438,000 for the three months ended March 31,
1994. Net loss for the three months ended March 31, 1995 decreased $65,000 to
$150,000 from the net loss of $215,000 for the three months ended March 31,
1994.
The increase in revenues is primarily due to increases in rental rates
negotiated on new and renewal leases at the property, increasing revenues
$50,000. The decrease in net loss is due to the increased revenues and a
decrease in interest expense of $7,000.
Cherry Hill Office Center
- -------------------------
Total revenues for the three months ended March 31, 1995 decreased
$39,000 to $343,000 from $382,000 for the three months ended March 31, 1994.
Net income for the three months ended March 31, 1995 decreased $38,000 to
$55,000 from the net income of $93,000 for the three months ended March 31,
1994.
The decrease in revenues and net income is primarily due to increased
vacancies, $21,000, and decreased average base rental of renewal and
restructured leases, $12,000, while total operating expenses decreased
marginally reflecting the decreased occupancy.
Mortgage Notes Receivable Portfolio
- -----------------------------------
Interest income from the mortgage notes receivable portfolio decreased
to $-0- for the three months ended March 31, 1995 as compared with $247,000 for
the three month period ended March 31, 1994. The decrease was caused by the
reacquisition of Nob Hill Apartments in July, 1994, eliminating mortgages
receivable from the Partnership's portfolio of investments.
<PAGE>10
Investment in Joint Venture
- ---------------------------
Equity in loss of joint venture for the three months ended March 31,
1995 decreased $159,000 to $46,000 from $205,000 for the three months ended
March 31, 1994.
The decrease in the loss was primarily due to an increase in the
property occupancy rate from 81% in the first quarter of 1994 as compared with
91% in the first quarter of 1995. The increase in occupancy resulted in an
increase in revenues of $134,000. In addition, a decrease in utilities expense
of $22,000 was attributable to the milder winter experienced in 1995 as
compared with 1994.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1995, the Registrant had cash and cash equivalents of
$875,000 in addition to $1,005,000 of deposits held in escrow by certain
lenders for the payment of insurance, real estate taxes, and certain capital
and maintenance costs. These balances are approximately $498,000 less than
cash, cash equivalents, and deposits held in escrow on December 31, 1994.
Debt at March 31, 1995 consisted of approximately $112 million of
nonrecourse first mortgage notes payable secured by real estate owned by the
Registrant. The mortgage note secured by Plantation Shopping Center,
$6,793,000, is scheduled to mature in the last quarter of 1995. Other
scheduled maturities through regularly scheduled monthly payments of principal
and interest will be approximately $446,000 for the last three fiscal quarters
of 1995. The terms of certain mortgage notes require monthly escrow of
estimated annual real estate tax, insurance and reserves for repairs,
maintenance and improvements to the secured property, in addition to the
payments of principal and interest.
As of March 31, 1995, the Registrant has issued irrevocable letters of
credit in the amount of $1,038,000 which primarily serve as additional
collateral securing financing for 1010 Market Street office building. The
Registrant has no other debt except normal trade accounts payable and expenses,
and accrued interest on previously discussed mortgage notes payable.
Cash flow from the Registrant's apartment properties has been stable
and in certain cases increasing moderately, reflecting an improvement in many
apartment submarkets. Cash flow from all sources is projected to be sufficient
to cover operating, financing and improvement costs in the near future at such
properties. Office markets where the Registrant owns properties have
experienced extended periods of high vacancy
<PAGE> 11
rates, significantly lower effective rental rates, reduced demand, and high
risks of tenant failures and overbuilding. Terms of new and renewals of
existing leases are being made that are significantly more in favor of tenants
with reduced rental rates, periods of free or reduced rent and costs of
altering and improving rented premises being borne by the landlord.
Consequently, rental revenues have in recent years, for certain properties,
been insufficient to cover operating costs, tenant improvement costs and other
capital expenditures and scheduled debt service payments. Funds generated from
other sources, including, but not limited to, sales or joint venturing of real
estate investments or additional secured or unsecured borrowing, have at times
been utilized to offset cash flow deficits resulting from operating these
properties. The Registrant projects that it will be able to generate
sufficient cash flow from all sources to meet working capital requirements in
1995.
Due to the impact of the conditions discussed above and the continuing decline
in commercial office rents in the downtown Los Angeles office market, cash flow
generated by International Jewelry Center has not been sufficient to carry debt
service on the mortgage encumbering the property. The Registrant ceased paying
scheduled debt service in May 1993 and since then has only been paying debt
service based on available cash flow from the building. The loan was declared
in default by the lender in November 1993. The lender filed a Notice of
Default and Election to Sell on March 3, 1995. It is uncertain whether the
Registrant will be able to successfully continue to hold the property or obtain
some other resolution that would be beneficial to it.
<PAGE>12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
All other item numbers are omitted because
they are not applicable.
<PAGE>13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SB PARTNERS
-----------------------------------
(Registrant)
By: SB PARTNERS REAL ESTATE CORPORATION
-----------------------------------
General Partner
Dated: May 12, 1995 By: /s/ John H. Streicker
-----------------------------------
John H. Streicker
President
Dated: May 12, 1995 By: /s/ Elizabeth B. Longo
-----------------------------------
Elizabeth B. Longo
Chief Financial Officer
Dated: May 12, 1995 By: /s/ George N. Tietjen
-----------------------------------
George N. Tietjen III
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 875,025
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,596,251
<PP&E> 173,332,953
<DEPRECIATION> (46,696,346)
<TOTAL-ASSETS> 134,107,883
<CURRENT-LIABILITIES> 9,183,707
<BONDS> 112,171,839
<COMMON> 0
0
0
<OTHER-SE> 12,752,337
<TOTAL-LIABILITY-AND-EQUITY> 134,107,883
<SALES> 0
<TOTAL-REVENUES> 5,901,782
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,895,981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,871,374
<INCOME-PRETAX> (1,865,573)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,865,573)
<EPS-PRIMARY> (241)
<EPS-DILUTED> (241)
</TABLE>
