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 June 30, 1996 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
--------------------
- ---------------------------------------------------------------------------
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
June 30, 1996 and December 31, 1995 . . . . . . . 1
Statements of Operations
For the three and six months ended June 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . 2
Statements of Changes in Partners' Capital
For the years ended December 31, 1995 and 1994
and the six months ended June 30, 1996 . . . . . . 3
Statements of Cash Flows
For the six months ended June 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . 5 - 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations . 7 - 15
Part II Other Information . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>1
<TABLE>
SB PARTNERS
(a New York limited partnership)
BALANCE SHEETS
June 30, 1996 (Not Audited) and
December 31, 1995 (Audited, but not covered by the report of independent accountants)
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Assets:
Investments -
Real Estate, at cost
Land $ 12,092,365 $ 12,092,365
Buildings, furnishings and improvements 84,912,421 140,331,546
Less - accumulated depreciation and valuation allowance (28,909,650) (45,560,951)
------------ ------------
68,095,136 106,862,960
Investment in joint venture 10,597,749 10,697,225
------------ ------------
78,692,885 117,560,185
Other assets-
Cash and cash equivalents 202,678 3,304,968
Accounts receivable, accrued interest and other 3,865,720 6,394,068
------------ ------------
Total assets $ 82,761,283 $127,259,221
============ ============
Liabilities:
Mortgage notes payable $ 66,792,492 $103,407,513
Accounts payable and accrued expenses 1,958,267 11,271,026
Tenants security deposits 298,084 1,306,052
------------ ------------
Total liabilities 69,048,843 115,984,591
------------ ------------
Partners' Capital:
Units of partnership interest without par value;
Limited partners - 7,753 units 13,729,107 11,291,611
General partner - 1 unit (16,667) (16,981)
------------ ------------
13,712,440 11,274,630
------------ ------------
Total liabilities & partners' capital $ 82,761,283 $127,259,221
============ ============
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>2
<TABLE>
SB PARTNERS
(a New York limited partnership)
STATEMENTS OF OPERATIONS (Not Audited)
<CAPTION>
For The Three Months For The Six Months
Ended June 30, Ended June 30,
---------------------------- ------------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 4,587,757 $ 5,619,631 $ 9,876,346 $11,286,715
Interest on short-term investments 13,339 8,706 34,197 28,824
Other 132,593 117,061 264,066 331,641
----------- ----------- ----------- -----------
Total revenues 4,733,689 5,745,398 10,174,609 11,647,180
----------- ----------- ----------- -----------
Expenses:
Interest on mortgage notes payable 2,598,596 2,873,632 4,978,139 5,745,006
Real estate operating expenses 3,997,861 2,567,535 6,581,538 5,114,833
Depreciation and amortization 997,157 1,198,667 2,215,126 2,393,218
Real estate taxes 225,553 462,387 670,883 959,320
Management fees 361,986 486,387 846,736 970,104
Other 151,198 179,758 371,310 307,567
----------- ----------- ----------- ----------
Total expenses 8,332,351 7,768,366 15,663,732 15,490,048
----------- ----------- ----------- ----------
Loss from operations (3,598,662) (2,022,968) (5,489,123) (3,842,868)
Equity in net income of joint venture 205,824 296,036 391,281 250,363
----------- ----------- ----------- -----------
Net loss before extraordnary item (3,392,838) (1,726,932) (5,097,842) (3,592,505)
Gain on disposition of investment in real estate 7,535,652 0 7,535,652 0
----------- ----------- ----------- -----------
Net income (loss) 4,142,814 (1,726,932) 2,437,810 (3,592,505)
Income (loss) allocated to general partner 534 (223) 314 (463)
----------- ----------- ----------- -----------
Income (loss) allocated to limited partners $ 4,142,280 $(1,726,709) $ 2,437,496 $(3,592,042)
=========== =========== =========== ===========
Net Income (Loss) Per Unit of Limited Partnership Interest:
Loss before extraordinary items $ (437.56) $ (222.71) $ (657.45) $ (463.31)
Extraordinary income $ 971.84 $ 0.00 $ 971.84 $ 0.00
=========== =========== =========== ===========
Weighted Average Number of Units of Limited
Partnership Interest Outstanding
7,753 7,753 7,753 7,753
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>3
<TABLE>
SB PARTNERS
(a New York limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the six months ended June 31, 1996 (Not Audited) and
for the years ended December 31, 1995 and 1994 (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, 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 - - - (3,342,849) (3,342,849
----- ------------ ------------ ------------ -----------
Balance, December 31, 1995 7,753 119,968,973 (97,728,323) (10,949,039) 11,291,611
Net income for the six month period - - - 2,437,496 2,437,496
----- ------------ ------------ ------------ -----------
Balance, June 30, 1996 7,753 $119,968,973 $(97,728,323) $ (8,511,543) $13,729,107
===== ============ ============ ============ ===========
General Partner:
Units of
Partnership Cumulative
Interest Cash Accumulated
Number Amount Distributions Earnings Total
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 - - - (431) (431)
----- ------- -------- ------- --------
Balance, December 31, 1995 1 10,000 (24,559) (2,422) (16,981)
Net income for the six month period - - - 314 314
----- ------- -------- ------- --------
Balance, June 30, 1996 1 $10,000 $(24,559) $(2,108) $(16,667)
===== ======= ======== ======= ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>4
<TABLE>
SB PARTNERS
(a New York limited partnership)
STATEMENTS OF CASH FLOWS (Not Audited)
<CAPTION>
For the Six Months Ended
June 30,
-------------------------------
1996 1995
---------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 2,437,810 $(3,592,505)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Extraordinary gain on disposition of investment in real estate (7,535,652) 0
Equity in net income of joint venture (391,281) (250,363)
Depreciation and amortization 2,215,126 2,393,218
Amortization of discount on mortgage notes payable 0 188,488
Decrease in other assets 2,254,633 53,009
Increase in other liabilities 851,242 1,524,806
----------- -----------
Net cash provided by (used in) operating activities (168,122) 316,653
----------- -----------
Cash Flows From Investing Activities:
Proceeds from sale of investment in real estate 125,622 0
Capital additions to real estate (946,282) (1,141,737)
Payments and distributions received from joint venture 602,994 430,771
----------- -----------
Net cash used in investing activities (217,666) (710,966)
----------- -----------
Cash Flows From Financing Activities:
Proceeds from mortgage notes payable 5,350,000 0
Proceeds from short-term loan 1,038,370 0
Retirement of mortgage note payable (5,173,235) 0
Principal payments on mortgage notes payable (2,893,267) (347,792)
Repayment of short-term loan (1,038,370) 0
----------- -----------
Net cash used in financing activities (2,716,502) (347,792)
----------- -----------
Net decrease in cash and cash equivalents (3,102,290) (742,105)
Cash and cash equivalents at beginning of period 3,304,968 1,074,985
----------- -----------
Cash and cash equivalents at end of period $ 202,678 $ 332,880
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 3,629,961 $ 4,018,476
=========== ===========
Supplemental disclosures of non-cash investing and financing activities:
The disposition of International Jewelry Center, to the extent of the release from liability
for the underlying mortgage noted secured by the property, represents non-cash investing and
financing activity which has been excluded from the statements of cash flows.
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.
The results of operations for the three and six month periods
ended June 30, 1996 and 1995 are not necessarily indicative of the
results to be expected for the full year.
(2) Mortgage Notes Payable
----------------------
During the quarter ended June 30, 1996, the Registrant
refinanced the mortgage note secured by Plantation Shopping Center.
The existing mortgage note, with a balance of $5,173,000, was retired
and a short-term secured note of $5,350,000 obtained from a bank was
placed on the property. The Registrant expects to evaluate the
potential for a sale of the shopping center or to refinance the new
short-term loan with more conventional long-term financing prior to
the maturity of the note at the end of 1997.
<PAGE>6
(3) Gain on Disposition of Investment in Real Estate
------------------------------------------------
As previously reported, cash flow generated by International
Jewelry Center, located in Los Angeles, California, had 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 had been paying debt service based on available
cash flow from the building. The loan was declared in default by the
lender in November 1993, and the lender filed a Notice of Default and
Election to Sell on March 3, 1995 and a Notice of Trustee's Sale on
April 24, 1996. Negotiations with the lender were concluded on May
22, 1996, when the title to the property was transferred to a designee
of the lender. Consideration for this conveyance was $238,000,
subject to the first leasehold note and deed of trust, the balance of
which was $33,898,520, and the assumption by the designee of the
ground lease. The Registrant had a gain of $7,536,000 associated with
the disposition. The disposition will have negative tax consequences
for some partners.
Please refer also to the Liquidity and Capital Resources section of
the Management Discussion and Analysis.
(4) Commitments and Contingencies
-----------------------------
The Registrant is a party to certain actions directly related
to its normal business operations. While the ultimate outcome is not
presently determinable with certainty, the Registrant believes that
the resolution of these matters will not have a material effect on its
financial position and results of operations.
<PAGE>7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1996
----------------------------------------
General
-------
The financial statements as of and for the three and six
months ended June 30, 1996 reflect the operations of three office
properties, including the International Jewelry Center (See Footnote 3
of the Financial Statements), one shopping center, two residential
garden apartment properties and two joint ventures. The financial
statements as of and for the three and six months ended June 30, 1995
reflect the operations of three office properties, one shopping
center, three residential garden apartment properties and two joint
ventures.
Total revenues for the three months ended June 30, 1996
decreased $1,011,000 to approximately $4,734,000 from approximately
$5,745,000 for the three months ended June 30, 1995. Net income after
gain on disposition of real estate increased $5,870,000 to net income
of approximately $4,143,000 from a net loss of approximately
$1,727,000 for the three months ended June 30, 1995.
Total revenues for the six months ended June 30, 1996
decreased $1,472,000 to approximately $10,175,000 from approximately
$11,647,000 for the six months ended June 30, 1995. Net income after
gain on disposition of real estate increased $6,031,000 to net income
of approximately $2,438,000 from a net loss of approximately
$3,593,000 for the six months ended June 30, 1995.
Changes in total revenues and net income/loss are
substantially attributable to the sale of Sahara Palms Apartments in
December, 1995, and the disposition of the International Jewelry
Center in May, 1996.
<PAGE>8
Liquidity and Capital Resources
-------------------------------
As of June 30, 1996, the Registrant had cash and cash
equivalents of $203,000 in addition to $1,112,000 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 $3,135,000 less than cash, cash equivalents, and
deposits held in escrow on December 31, 1995. The decrease is
primarily due to the payment of a required principal reduction of
$1,500,000 paid to the former lender of the mortgage note secured by
Plantation Shopping Center, payment of $1,038,370 to reimburse the
letter of credit securing the financing for 1010 Market Street office
building, and approximately $355,000 of mortgage principal paid
through regularly scheduled payments. In addition, the Registrant
made expenditures of approximately $946,000 for capital additions to
existing properties during the period.
Debt at June 30, 1996 consisted of approximately $61 million
of nonrecourse first mortgage notes payable secured by real estate
owned by the Registrant, and a note of $5,350,000 secured by
Plantation Shopping Center. Payment terms of the new note include
interest only, based upon a fixed spread over a LIBOR index, until the
maturity of the note at the end of 1997. The Registrant will evaluate
the possibility of a sale of the property or more conventional long
term financing before the term of the note expires. The Registrant is
negotiating with the current lender for the mortgage loan secured by
Meadowwood Apartments to extend the maturity of the loan, increase the
loan amount, and reduce the interest rate. Other scheduled maturities
through regularly scheduled monthly payments of principal and interest
will be approximately $112,000 for the last two fiscal quarters of
1996. 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. The Registrant has no other
debt except normal trade accounts payable and expenses, and accrued
interest on previously discussed mortgage notes payable.
<PAGE>9
Office markets where the Registrant owns properties have
experienced and are likely to continue experiencing extended periods
of high vacancy rates, significantly lower effective rental rates,
reduced demand, and high risks of tenant failures and overbuilding.
New leases and renewals of existing leases are being made on terms
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, for certain properties, in recent years have been and
may continue to be 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.
In 1994 and 1995, Southwestern Bell, formerly the largest non-
governmental tenant in the St. Louis Central Business District,
relocated its headquarters and other operations to San Antonio, Texas
and other cities. The St. Louis CBD continues to suffer from
significant decreases in rental rates charged for new and renewal
leases and high vacancy rates caused by other tenants downsizing,
ceasing operations, or relocating to suburban locations or other
cities. This has, and will continue to, adversely affect the
operation of 1010 Market Street in St. Louis.
During 1996 and the first seven months of 1997, leases for
approximately 170,000 square feet of space at 1010 Market Street
expire. Included in this total is one tenant previously occupying
approximately 35,000 square feet which it vacated by late 1995,
although it paid rent through the expiration of its lease in March
1996. As such, operating cash flow from the 1010 Market Street office
building is no longer sufficient to cover debt service in 1996.
The Registrant stopped making regularly scheduled payments on
the mortgage note secured by 1010 Market Street office building in
May, 1996. The lender filed a Notice of Default on May 9, and a
notice of Acceleration of Debt on May 22, 1996. The lender then drew
the full amount, $1,038,000, of the irrevocable letters of credit
which served as additional collateral securing the financing for the
1010 Market Street office building. The Registrant secured a short-
term loan from a bank to reimburse the draw on the letter of credit,
then repaid the short-term loan in full by the end of the quarter. On
August 1, 1996, the lender filed a Notice of Foreclosure Sale to take
place on August 28, 1996. The Registrant is currently in negotiations
to return title to the property to the lender. Such a transfer of
title will have negative tax consequences for some partners.
<PAGE>10
Cash flow from the Registrant's apartment properties has been
increasing moderately, reflecting the strong Atlanta and Reno
apartment submarkets. Based upon the refinancing of the loan with a
significantly lower interest rate and debt service requirement,
Plantation Center is expected to generate positive cash flow for the
balance of 1996. The disposition of International Jewelry Center from
the Registrant's portfolio of investments will not have a significant
impact on cash flows since, during recent years, the Registrant paid
debt service to the lender equal to the cash flow from the operations
of the property. Although it expects to generate sufficient cash flow
from all sources to cover possible shortfalls at certain commercial
properties in 1996, the Registrant has elected and may continue to
elect not to fund such deficits for certain properties.
Holiday Park Apartments
-----------------------
Total revenues for the three months ended June 30, 1996
increased $10,000 to $276,000 from $266,000 for the three months ended
June 30, 1995. Net loss after depreciation and mortgage interest
expense for the three months ended June 30, 1996 decreased $13,000 to
$16,000 from $29,000 for the three months ended June 30, 1995. The
increase in revenues is primarily a result of a stronger apartment
market as evidenced by rental increases implemented at the property
during the year which increased revenues $4,000, while average
occupancy at the property increased, which increased income $5,000.
The decrease in net loss is primarily due to the increased revenues
and decreases in repairs and maintenance expense of $4,000.
Total revenues for the six months ended June 30, 1996
increased $18,000 to $549,000 from $531,000 for the six months ended
June 30, 1995. Net loss after depreciation and mortgage interest
expense decreased $28,000 to $42,000 from $70,000 for the six months
ended June 30, 1995. The increase in revenues is primarily due to the
stronger apartment market as discussed above, as rental increases
implemented at the property increased revenues $10,000, and increased
occupancy increased revenues $7,000. The decrease in net loss is
primarily due to the increase in revenue as well as decreases in
expenses, primarily a decrease in repairs and maintenance expense of
$10,000.
<PAGE>11
Meadow Wood Apartments
----------------------
Total revenues for the three months ended June 30, 1996
increased $16,000 to $1,122,000 from $1,106,000 for the three months
ended June 30, 1995. Net loss after depreciation and mortgage
interest expense for the three months ended June 30, 1996 increased
$40,000 to $47,000 from $7,000 for the three months ended June 30,
1995. The increase in revenues is primarily a result of increases in
rental rates implemented at the property which increased revenues by
$72,000, but were partially offset by increases in vacancies which
decreased revenues by $54,000. The increase in net loss was primarily
the result of increased costs of repairs and maintenance at the
property of $37,000, utilities expense of $13,000, and increased
administrative expenses of $8,000.
Total revenues for the six months ended June 30, 1996
increased $44,000 to $2,271,000 from $2,227,000 for the six months
ended June 30, 1995. Net loss after depreciation and mortgage
interest expense for the six months ended June 30, 1996 increased
$12,000 to $26,000 from $14,000 for the six months ended June 30,
1995. The increase in revenues is the result of increased rental
rates implemented at the property, which increased revenues by
$133,000, but which were partially offset by increased vacancies which
decreased revenues $91,000. The increase in net loss is primarily a
result of increases in property operating costs, such as increases in
repairs and maintenance of $69,000, which were partially offset by
decreases in utilities expense of $9,000 and interest expense of
$5,000.
International Jewelry Center
----------------------------
The partnership transferred title of the International Jewelry
Center on May 22, 1996 through negotiations with the former lender
which resulted in a net gain on disposition of $7,536,000. (Please
refer to Footnote 3 of the Financial Statements.)
Total revenues for the three months ended June 30, 1996 decreased
$700,000 to $1,094,000 from $1,794,000 for the three months ended June
30, 1995. Net loss before the gain on disposition and after
depreciation and mortgage interest expense for the three months ended
June 30, 1996 increased $2,113,000 to $2,772,000 from $659,000 for the
three months ended June 30, 1995.
<PAGE>12
Total revenues for the six months ended June 30, 1996
decreased $600,000 to $2,853,000 from $3,453,000 for the six months
ended June 30, 1995. Net loss before the gain on disposition and
after depreciation and mortgage interest expense for the six months
ended June 30, 1996 increased $2,322,000 to $3,798,000 from $1,476,000
for the six months ended June 30, 1995.
Due to the disposition of the property by the Registrant, the
reporting period for the International Jewelry Center ended on May 22,
1996. The changes in revenues and net income are substantially due to
the shortened reporting periods. Also included in the reporting
periods is a write-off of bad debt expense of $1,931,000 which
increased the net losses for the reporting periods.
Plantation Shopping Center
--------------------------
Total revenues for the three months ended June 30, 1996
increased $75,000 to $442,000 from $367,000 for the three months ended
June 30, 1995. Net income after depreciation and mortgage interest
expense for the three months ended June 30, 1996 increased $139,000 to
net income of $7,000 from a net loss of $132,000 for the three months
ended June 30, 1995. The increase in revenues was primarily due to an
increase in rental rates on new and renewal leases at the property
which increased income $133,000, but was partially offset by decreases
in escalation income of $36,000 and a decrease in average occupancy of
approximately 5% to 76% from 81% for the comparable period a year
earlier, which decreased income $23,000. The increase in net income
was primarily due to the increase in revenues and a decrease in
interest expense of $100,000. The increases in net income were
partially offset by increases in operating expenses, primarily repairs
and maintenance of $19,000 and depreciation expense of $19,000.
<PAGE>13
Total revenues for the six months ended June 30, 1996
increased $85,000 to $849,000 from $764,000 for the six months ended
June 30, 1995. Net income after depreciation and mortgage interest
expense for the six months ended June 30, 1996 increased $236,000 to
net income of $9,000 from a net loss of $227,000 for the six months
ended June 30, 1995. The increased revenues were primarily the result
of increased rental rates negotiated on new and renewal leases at the
property which increased income $134,000, and increases in
miscellaneous income of $19,000. The increases in income were
partially offset by a decrease in average occupancy of approximately
4% to 76% from 80% for the period a year earlier which decreased
income $35,000, and decreases in escalation income of $33,000. The
increase in net income was due to the increased revenues and a
decrease in interest expense of $204,000, which were partially offset
by increases in depreciation expense of $40,000 and repairs and
maintenance expense of $17,000.
The decreases in interest expense were primarily due to the payment of
a required principal reduction of $1,500,000 on the mortgage note
secured by the property in February, 1996. This note was refinanced
during the quarter. (Refer also the Liquidity and Capital Resources
Section and Footnote 2 of the Financial Statements.)
1010 Market Street
------------------
Total revenues for the three months ended June 30, 1996
decreased $8,000 to $1,421,000 from $1,429,000 for the three months
ended June 30, 1995. Net loss after depreciation and mortgage
interest expense increased $360,000 to $540,000 from $180,000 for the
three months ended June 30, 1995. The decrease in revenues was
primarily due to a decrease in average occupancy of 9% to 77% from 86%
for the comparable period a year earlier. The decrease in occupancy
decreased revenues $147,000, and decreases in escalation and other
income decreased revenues $30,000, however, these decreases were
almost entirely offset by increases in income due to increased rental
rates negotiated on new and renewal leases at the property, which
increased revenues $169,000. The increase in net loss was primarily
due to an increase in interest expense of $361,000.
<PAGE>14
Total revenues for the six months ended June 30, 1996
decreased $51,000 to $2,874,000 from $2,925,000 for the six months
ended June 30, 1995. Net loss after depreciation and mortgage
interest expense increased $382,000 to $712,000 from $330,000 for the
six months ended June 30, 1995. The decrease in revenues was
primarily due to a decrease in average occupancy of 5% to 82% from 87%
for the six months ended June 30, 1995. The decrease in occupancy
decreased revenues $137,000, and decreases in escalation and other
income decreased revenues $48,000, however, these decreases were
partially offset by increases in income due to increased rental rates
negotiated on new and renewal leases at the property, which increased
revenues $130,000. The increase in net loss was primarily due to the
decreased revenue and increases in interest expense of $325,000, which
were partially offset by decreases in operating expenses, primarily
decreases in repairs and maintenance of $32,000 and depreciation
expense of $23,000.
As previously discussed, the Registrant stopped making
regularly scheduled payments on the mortgage note secured by 1010
Market Street office building in May, 1996. (Refer also the Liquidity
and Capital Resources Section.)
Cherry Hill Office Center
-------------------------
Total revenues for the three months ended June 30, 1996
increased $41,000 to $365,000 from $324,000 for the three months ended
June 30, 1995. Net income after depreciation and mortgage interest
expense increased $18,000 to $33,000 from $15,000 for the three months
ended June 30, 1995. The increase in revenues was primarily due to an
increase in average occupancy of 6% to 76% from 70%, which increased
revenues by $30,000, and increases in escalation income of $13,000.
The increase in net income was due to the increase in revenues and a
decrease in utilities expense of $33,000, partially offset by
increases in other operating expenses, primarily increases in real
estate taxes of $30,000, payroll and related costs of $7,000,
depreciation expense of $7,000, and professional fees of $3,000.
<PAGE>15
Total revenues for the six months ended June 30, 1996
increased $65,000 to $732,000 from $667,000 for the six months ended
June 30, 1995. Net income for the six months ended June 30, 1996
decreased $47,000 to $24,000 from $71,000 for the six months ended
June 30, 1995. The increase in revenues was primarily due to an
increase in average occupancy of 2% to 75% from 73%, which increased
income by $26,000, increases in rental rates negotiated on new and
renewal leases which increased income $21,000, increases in escalation
income of $13,000, and increases in other income of $5,000. The
decrease in net income was due to increases in operating expenses,
primarily increases in utilities expense of $37,000, repairs and
maintenance of $32,000, depreciation expense of $16,000, and payroll
and related costs of $13,000.
Investment in Joint Venture
---------------------------
Equity in net income of joint venture for the three months
ended June 30, 1996 decreased $90,000 to $206,000 from $296,000 for
the three months ended June 30, 1995. The decrease in net income is
primarily due to increases in property operating expenses, primarily
utilities of $38,000, repairs and maintenance of $22,000, payroll and
related costs of $14,000.
Equity in net income of joint venture for the six months ended
June 30, 1996 increased $141,000 to $391,00 from $250,000 for the six
months ended June 30, 1995. The increase in income for the six month
period reflects the strong Atlanta apartment market as increases in
rental rates implemented at the property increased revenues $172,000,
while occupancy remained high. The increase in revenues was partially
offset by increases in operating expenses, primarily utilities expense
which increased $60,000 over the six month period ending June 30,
1995.
<PAGE>16
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
During the quarter ended June 30, 1996, the Registrant filed
Form 8-K to report the disposition of International Jewelry
Center. Included in the report was a pro forma Balance Sheet,
restated to reflect the removal of the assets and liabilities
of the International Jewelry Center, and pro forma Statements
of Operations for both the three months ended March 31, 1996
and the year ended December 31, 1995, restated to reflect the
results of operations of the Registrant as if the disposition
has been consummated at the beginning of the periods
presented. The report was dated May 22, 1996.
All other item numbers are not submitted because they are not
applicable.
<PAGE>17
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: August 14, 1996 By: /s/ John H. Streicker
-------------------------------
John H. Streicker
President
Dated: August 14, 1996 By: /s/ Elizabeth B. Longo
-------------------------------
Elizabeth B. Longo
Chief Financial Officer
Dated: August 14, 1996 By: /s/ George N. Tietjen
-------------------------------
George N. Tietjen III
Vice President and Controller <PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
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0
<OTHER-SE> 13,712,440
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